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

Scott Garnet
Scott Garnet 06 Nov 2017

If you have a patio or a porch it is important to make sure that any connecting doors are secured. Good advice for sliding glass doors is replacing the panels with storm resistant glass and getting heavier...

view article
richardrawlings
richardrawlings 01 Nov 2017

What has not been mentioned here is the effect of not only higher interest payments, but also that these payments are less likely to be offsettable as a business cost due to the scaling back of mortgage...

view article
Kelvin Lloyd
Kelvin Lloyd 09 Oct 2017

IT is up, to the Planners. If they will only give permission for bungalows on certain (suitable) sites, they will be built.

view article
maggie swift
maggie swift 09 Oct 2017

It's just the beginning of the shocking rise.

view article
maggie swift
maggie swift 09 Oct 2017

I have recently read that the bungalows can provide social housing for elderly residents in London.

view article
zoe glover
zoe glover 05 Oct 2017

Update! Worst company I have ever dealt with. Undervalued a Cambridge property by over 100k, wont take on any evidence of valuation including a RICS valuation done 3 years ago for the very same value...

view article
Paul Edwards
Paul Edwards 27 Sep 2017

Its nonsense articles such as this that make it harder to get clients to realise just how difficult the market is out there. When you see Rightmove and there are more 'price reduced' then 'new' most days...

view article
Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

view article
RyanGeo
RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

view article
sean benton
sean benton 01 Sep 2017

Identity theft is a thread for any profession. So,people should stay alarmed. I once take help from a letting agent and came to know that letting agents are taking every precaution to prevent fraudulent...

view article
Mark N.
Mark N. 30 Aug 2017

We have seen a surge in instructions over August and that should continue into September too.

view article
Chris
Chris 30 Aug 2017

Unfortunately, all the legislation bears its force on Landlords and ignores, naively, the effect of Rogue Tenants on the ability of landlords to keep houses in repair and offer properties for rent at reasonable...

view article

Related stories

More articles from Landlords