Market update – Commercial property investment

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Edward Harrowsmith, Associate Director

“2017 proved to be a testing time in terms of commercial property investment, with a frustrating lack of stock on the market.

This put downward pressure on yields, making prime commercial property an expensive asset class to invest in.

We’re now seeing a more positive sentiment and special mention must be made to the industrial sector, which saw the biggest yield shift, mainly due to the rapid expansion of e-commerce, with many of us now choosing to shop online.

The technology sector is also likely to go from strength to strength. This will have a positive effect on rental values for both offices and industrial buildings in the regions, due to a lack of available accommodation and limited speculative development.

In fact, prime yields in the industrial sector for secured long term income have achieved record values, with some investments selling for 4.25% yield, which we now believe is the top of the market for this sector.

We believe this year is likely to be slightly more favourable for property investors.

Fallout from Brexit hasn’t been as bad as people feared, unemployment remains low and the value of the pound is starting to rise.

This effect will no doubt improve the supply of commercial investments, with many property companies already starting 2018 with sales.

With interest rates likely to rise again, we’re optimistic that we’ll find better value, as yields inevitably soften slightly.”


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