Following a period of activity in 2015, the growth in rental values will see commercial property returns in 2016 increase, says leading real estate management specialist Blue Marble Asset Management.
Chief Executive of Blue Marble Asset Management, Tim Matthews, said that the main focus for serious commercial investors will be rental growth in both office and industrial sectors in 2016.
According to Mr Matthews, 2015 saw total property returns fall short of the 2014 high of 19.7%, with just 14%. The key factor of the investment market last year was rental growth across all UK property of 4%, which is the first time recovery has happened to match since pre-recession levels. This is expected to grow in a similar way in 2016.
He adds: “The office sector was the strongest performer, with central London offices recording an increase in rental values of 10.3% in 2015. Close behind was industrial sector with rental appreciation across the country of 5%.
“Huge price rises for commercial property in 2014 and 2015, driven by demand exceeding supply, resulted in yield compression with one notable deal only last month for the acquisition of a £20 million Birmingham city centre office block delivering a yield of only 4.3%.”
Mr Matthews says however, this doesn’t mean there is another frantic year of activity like 2015 on the horizon, where the market was reminiscent of a Black Friday sale in which freehold properties were grabbed at some “steamy prices.”
He concludes: “Thankfully 2016 should see investors becoming more concerned about yields, with a greater focus on market sectors and areas where rental growth will continue.”
Blue Marble Asset Management currently has more than £60 million of property assets under management.
