London office space was the capital’s best performing commercial property class in February, a new report shows. Overall, Central London office space returned a yield of 2.6 percent, whilst capital values rose 2.1 percent.
Across the sector as a whole, the picture was more mixed. Despite the fact that commercial property capital values rose around 1.4 percent, rental growth actually dropped, reflecting some of the difficulties still experienced by firms through the recession. Rent for office space showed flat growth last month, meaning that yields effectively fell.
Analysts have suggested that further yield compression is likely as capital values come back up after the sharp falls experienced in 2007 and 2008. One side effect of this is likely to be that secondary property becomes more attractive to investors, who will end up competing for the best opportunities in the limited commercial property market.