Will rental growth drive 2016 commercial property returns?

Will rental growth drive 2016 commercial property returns?

According to real estate asset management specialist, Blue Marble Asset Management, rather than yield compression, growth in rental values will drive commercial property returns in 2016.

Tim Matthews, Chief Executive of Blue Marble Asset Management, believes that rental growth in the office and industrial sectors in key geographic locations will be the focus for serious commercial property investors in 2016.

Mr Matthews says: “At 14%, total property returns in 2015 fell short of the high of 19.7% of 2014, but beat the 11.5% of 2013.  However, the key factor in the UK investment market in 2015 was rental growth for all UK property of 4%, the first time this has recovered to match pre-recession levels of 4.1% growth in 2007.  Growth is expected to continue at similar levels in 2016.

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 the industrial sector with rental appreciation across the country of 5%.


Huge prices rises for commercial property in 2014 and 2015, driven by demand exceeding supply, resulted in yield compression with one notable deal in January 2016 for the acquisition of a £20 million Birmingham city centre office block delivering a yield of only 4.3%.

However this does not mean we are in for another year of frantic activity like 2015, when in the middle of the year, the market was more reminiscent of a Black Friday sale with freehold properties snapped up at some very steamy prices.  Thankfully 2016 should see investors becoming more concerned about yields, with a greater focus on market sectors and areas where rental growth will continue.

These market conditions will allow asset managers who invest carefully and strategically on behalf of clients, such as Blue Marble Asset Management, once again to secure off-market deals which deliver long term value.”

Join our mailing list:

Leave a comment



Latest Comments

brandonlee10
brandonlee10 24 Jul 2017

The financial ramifications of the triggering of Article 50, the starting gun for Britain's departure from the EU, are far from clear. Buyers will be most cautious in London, given that buying a home in...

view article
IrisJ.
IrisJ. 19 Jul 2017

Great advice, but may I also add that when buying an already built home, make sure you do all of the proper inspections. Most importantly pest inspection because people tend to get surprised when they

view article
IrisJ.
IrisJ. 17 Jul 2017

The third point is, in my opinion, the most important one. People have become too inconsiderate and careless when it comes to rented properties. If a landlord wants to protect their property, regular visits...

view article
cornishalan
cornishalan 10 Jul 2017

Added to the cost of purchasing these village properties are the above average maintenance costs. Particularly where the property is a listed building or requires specialist building skills such as thatching...

view article
Jo Mullett
Jo Mullett 07 Jul 2017

Here in Swansea, known as the Japanese knotweed capital of the UK, it never fails to amazes me that people have no idea of the potential problems this invasive non-native plant can cause when buying or...

view article
NathanG
NathanG 05 Jul 2017

McDonalds, for example, have been purchasing their real estate on prime locations for years. If something happens to the company they'll have invaluable assets that will be able to save them. We might

view article
Jonah
Jonah 04 Jul 2017

Graham: surprised to see you cite the "extra tax liability" as capping out at ?560. It doesn't - the extra tax is exponential, as it is levied on the income (i.e the inflating level of rental income you...

view article
Dianne Griffen
Dianne Griffen 29 Jun 2017

Be very wary of anyone bringing you deals that they have ?found? and want to ?sell on to you? or ?joint venture? with you on ? you need a proper legal contract for this, involve a RICs surveyor to confirm...

view article
jason hadzikostas
jason hadzikostas 28 Jun 2017

The most important thing is a budget. Students have to manage their spendings in food, house maintenance, books and many other things. According to me, student Studios are the perfect option for them as...

view article
SecomTech
SecomTech 22 Jun 2017

AT Last...This was discussed years ago and there was a move towards landlords registering their bad tenants on a database..(can't remember where) It seems a logical step though our leaders will probably...

view article
Bertrand
Bertrand 02 Jun 2017

How about the Welsh Govt introducing a scheme to protect landlords against "rogue" tenants who are then taken to court for criminal damage to the properties they trash. Pretty unlikely I suspect and politically...

view article
AmberMorris
AmberMorris 25 May 2017

"Please don't pick a novelty tune-playing doorbell. They're not 'fun'. They're stupid." Laughed a lot to this. It's actually true, though.

view article

Related stories

More articles from Landlords