Recent industry data suggests that yields are beginning to stabilize across many UK commercial property market sectors, signaling that the worst of the commercial property downturn is drawing to a close, according to leading global real estate investment manager, PRUPIM.
Despite continued uncertainties for the economy and short-term difficulties for rental markets, yields have reached levels across a range of commercial property sectors to suggest that they are now 'cheap' and able to provide medium-term property investors with at least their required investment returns, according to PRUPIM's latest half year UK forecasts released today.
"After the torrid conditions of the last two years, we seem to be heading into a more stable period for UK commercial property. Falling rents will ensure that total returns for property will still be noticeably negative in 2009. However, we foresee marginally positive total returns for commercial property in 2010 and above long-run average returns from the sector in 2011," said PRUPIM Head of Research, Professor Paul McNamara
"Investors are likely to remain cautious in the short term about commercial property given the continuing impact of the recession on rental levels and tenant security. However, given its current level of pricing, we are not surprised to see signs of renewed investor interest in UK property which, we believe, is now one of the most attractive markets in the world.
"We expect an increasing number of interesting investment opportunities to emerge as 2009 progresses with global investors likely to find the UK relatively attractive compared to other core real estate markets. Given investor caution, prime investments with guaranteed rental income streams are likely to be the most obviously in demand."
Source: PRUPIM
