British Land, one of Europe's biggest listed property companies, reported full-year results today and the key takeaway is this: London property prices are still going crazy.
European commercial property prices grew by a record 7.8 per cent in the fourth quarter of last year, fuelled by the ongoing recovery in the UK’s regional property markets.Figures out yesterday by property adviser DTZ show that prices rose by 20 per cent for the year overall thanks to a record last quarter, when investors splurged €65bn (£47.4bn) on European commercial property.The strongest growth was in the UK regions, which increased by 35 per cent compared to a year ago.Nigel Almond, the head of Capital Markets Research said: “Prices outside of London in the UK only began to show clear signs of recovery at the beginning of 2014, having fallen by close to 50 per cent from their peak in 2007. As a result prices are still 25 per cent below their peak and back at 2004 levels.”Central London also performed strongly, up 23 per cent year-on-year. However, Almond said the rate of growth was beginning to cool. Prices in London rose by just five per cent in the fourth quarter compared with eight per cent in the third quarter.“The cooling comes as no surprise as prices in London are now 20 per cent above their previous peak in 2007,” Almond added.
But political risks are rising – whether the Conservative Party or Labour win next May.
If we take the temperature of investors in commercial property right now, we would find warm support for the sector in the UK. In a low interest rate environment, and with returns from property far outstripping bond yields, commercial real estate has returned to favour. The UK commercial property market has performed strongly in 2014, with the sector returning 14 per cent during the first nine months of this year, according to the IPD UK Monthly Property Index. Capital values have also recovered by 28 per cent from their trough, although they are still 29 per cent below their excitable 2007 peak. But will this upward trajectory for commercial property continue in 2015, and does the sector offer good prospects for investors?
Spain’s richest and world’s fourth wealthiest Amancio Ortega has purchased the headquarters of multinational mining and metal group Rio Tinto located in the heart of London, reports Property Week. The founder of Inditex is said to have paid around £265 million, or €335 million.
Last year the volume of investment in the commercial real estate market in Europe climbed to 166 billion euros, the greatest amount since 2007. This volume represents a 30 percent increase compared to 2012 and investor interest has increased dramatically. In the last two years, most investments were in Great Britain, Germany and France. The results are based on the European Real Estate Investor Intentions study by CBRE.
Private investors warmed to commercial property funds in the years up to the financial crisis – and then suffered setbacks as values fell. Now the sector is bouncing back very strongly, analysts say
The market conditions that were inherent throughout the UK and the rest of the continent meant that the country enjoyed a strong year in terms of commercial property investment.
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