Property upswing boosts recovery

October 29, 2009

Research published by commercial property consultant, Lambert Smith Hampton (LSH), signals that the property market may be recovering from one of the sharpest downturns ever experienced.

The results from LSH’s quarterly survey of the UK property investment market identified that in a positive sign for commercial property, the market’s key indicator – transaction yields – fell last quarter for the first time since the start of the credit crunch in August 2007.

Ezra Nahome, CEO and Head of Capital Markets at LSH said: “The latest results are great news for commercial property.  Following on from the easing in the market that was seen in Q2, this latest movement has provided a much needed boost.”

The research identified that the average yield on transactions fell by 19bp to 7.68 per cent.

Institutional investors played a more significant role this quarter, returning to the market to purchase their highest level of property in two years. While UK institutions increased their buying activity this quarter, it is still overseas investors that are dominating buying activity.

Ezra said: “Overseas investors accounted for more than 50 percent of purchases last quarter and they are responsible for 43 percent of purchases in the year to date but things might be changing. The return of UK equity based investors will help to provide more balance to the property market.

“The availability of good quality investment stock was an issue that restricted activity levels over Q3 as vendors were reluctant to put property onto a thin trading market.  This may well change over the coming few months as rising values encourage the release of some better quality property.

“The warning sign for the market at the moment has to be the strength of occupational demand.  Rental values are falling across most markets and the economic conditions, whilst improving, are likely to remain tough.”

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