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

DmitriKara
DmitriKara 29 Jun 2016

I just read another article about eviction rising and this was exactly what was on my mind, Housing has become "cat and mouse"...

view article
DmitriKara
DmitriKara 29 Jun 2016

I am really not surprised. I've seen one too many impudent tenants and in my humble opinion renters have one too many privileges and options to abuse heir landlord in so many ways...

view article
DmitriKara
DmitriKara 29 Jun 2016

There is still so much uncertainty and I will surely step back and see what's happening before I could make any decisions on my end.

view article
ChristinaReedUK
ChristinaReedUK 20 Jun 2016

I don't understand why it's always a war between the two sides. Either, way the landlord is probably keeping a detailed inventory and will see the changes you've made. I just don't understand why there...

view article
NathanGreen
NathanGreen 16 Jun 2016

Seeing that the tenants are quite satisfied with their landlords and the properties is indeed great. I wonder, though, what is the situation in London alone? The tenants face sky-high rent levels in the...

view article
AndiMur
AndiMur 15 Jun 2016

TheGuardian published the same forecast. But on the other hand, professional brokers express different opinions. According totranio.com, an exit from the EU would not affect the demand/supply imbalance...

view article
Gary Holmes
Gary Holmes 14 Jun 2016

Having a professionally completed inventory at check-in and check-out is clearly (to me at least) of minor value. Tenants make un-authorised modifications and/or walk off with items that belong to the

view article
Violet Gibson
Violet Gibson 14 Jun 2016

Cautious people think buying off-plan is reckless, but over the past few years investors have literally made fortunes.Pre-release prices have obvious benefits for the developer, who gets instant finance...

view article
Kate Windleton
Kate Windleton 14 Jun 2016

An interesting research indeed. I guess that is in complete contrast with the United States where people often move from one coast to another. It will be interesting to hear the trends for people moving...

view article
NathanGreen
NathanGreen 14 Jun 2016

I think it all depends on the market conditions and how well your company is doing. You will agree that you can't demand more when you're killing yourself just to hang in there. Sometimes you need all

view article
ChristinaReedUK
ChristinaReedUK 13 Jun 2016

What does "detecting a bad vibe" mean actually. I've had certain vibes like these and yet have always found a reason , if there's any, why I don't like a certain property. The property maintenance might...

view article
keybanks estates
keybanks estates 08 Jun 2016

Great News for first time buyers, about time two!

view article

Related stories

More articles from Landlords