Unquenchable institutional thirst for shops is clearly reflected in Weatherall Green & Smith’s latest quarterly property index, where shops now form the higher percentage of the capital value for the first time since its inception in 1979.
Shops now form 35.05% of the total capital value of the funds included — higher than offices, which stand at 34.02%.
“Retail,” says Mike Dorman of WG&S’ research department, “has clearly shown greater capital growth. However, there has also been a distinct move by investors away from the office and industrial sectors and into shops. This move has been prompted by the strong performance from retail property over the past few years — a trend which has only begun to slow in the last 12 months or so.”
The firm believe this trend reflects the underlying strength of the economy, making the outlook for all property performance good.
Total returns on all sectors — 17.3% (compared with 6.67% in December 1986) and a current annual rental growth of 12% — reflect the overall buoyancy of the market.
Office sector total returns have shown the biggest improvement — up to 17.75% from a December 1986 low of 0.78%. Rental growth over the year to December 1987 rose to 13.4%.
The industrial sector has also witnessed improved rental growth over the last six months owing to a drop in national supply. The return over the last year was about 7% and a rise in capital values has meant that total returns in this sector are now running at a healthy 21.28%.
