News

EG data JLL monthly prime yields

News

Estates Gazette

15 January 2005

January: Downward pressure remains for third successive year

● The prime all-property yield continues to decline steadily and stands at 5.7%, down 30 basis points on the same period last year. This is the third successive year of falling yields; over this period the yield has fallen 60bp.

● Prime yields across all retail subsectors have remained stable since the middle of 2004. This follows falls in both prime shop and retail warehouse yields in the second quarter of 2004. Market evidence suggests that prime shop and shopping centre yields remain under pressure, with expectations of a downward movement in the next three months. We expect retail warehouse yields to remain stable.

● In the course of the past year we have seen office yields harden across the board. Over the last month we have seen a downward movement in prime West End and regional market yields. Downward pressure remains on West End and City yields.

● The industrial market has seen relatively little prime yield compression over the year. However, the differential between prime and secondary yields has narrowed significantly, by around 50bp, since the middle of 2004. Over the past month we have seen a downward shift in prime single-let warehouses, with pressure remaining on single and multilet units.

This is the first in a series of monthly data pages exclusively provided to EG by Jones Lang LaSalle.

Note: Yields are generated by Jones Lang LaSalle based on the latest evidence of deals by JLL and other agents. The prime yield series is a weighted yield (derived from capital values) based on individual prime yields.

Sector Retail	Yield (%)	Implied rental growth (%)	Movement since last month	Movement over past 12 months
Major regional centre shop	4.50	2	↔	↓
Shopping centre (regionally dominant)	5.75	0.6	↔	↔
Shopping centre (secondary)	7	-0.9	↔	↔
Retail warehouse (new standalone, open)	5.25	1.2	↔	↓
Retail warehouse (new parks, open A1) Offices	4.75	1.75	↔	↓
City	6	0.3	↔	↓
West End	5.25	1.2	↓	↓
City fringe/inner London	6.75	-0.6	↓	↓
Regional M25 towns (west and M4 corridor)	6.5	-0.3	↔	↓
Regional city centre	6.25	0	↓	↓
Out-of-town business park Industrial	6.5	-0.3	↔	↓
Prime single-let	6.25	0.3	↓	↓
Secondary multilet	7		↔	↓
*Implied rental growth is derived on a cashflow basis on the assumption of 15-year gilt yield plus 2%, less property yield, with rent paid quarterly in advance.

January: Downward pressure remains for third successive year ● The prime all-property yield continues to decline steadily and stands at 5.7%, down 30 basis points on the same period last year. This is the third successive year of falling yields; over this period the yield has fallen 60bp. ● Prime yields across all retail subsectors have remained stable since the middle of 2004. This follows falls in both prime shop and retail warehouse yields in the second quarter of 2004. Market evidence suggests that prime shop and shopping centre yields remain under pressure, with expectations of a downward movement in the next three months. We expect retail warehouse yields to remain stable. ● In the course of the past year we have seen office yields harden across the board. Over the last month we have seen a downward movement in prime West End and regional market yields. Downward pressure remains on West End and City yields. ● The industrial market has seen relatively little prime yield compression over the year. However, the differential between prime and secondary yields has narrowed significantly, by around 50bp, since the middle of 2004. Over the past month we have seen a downward shift in prime single-let warehouses, with pressure remaining on single and multilet units. This is the first in a series of monthly data pages exclusively provided to EG by Jones Lang LaSalle. Note: Yields are generated by Jones Lang LaSalle based on the latest evidence of deals by JLL and other agents. The prime yield series is a weighted yield (derived from capital values) based on individual prime yields. Sector Retail Yield (%) Implied rental growth (%) Movement since last month Movement over past 12 months Major regional centre shop 4.50 2 ↔ ↓ Shopping centre (regionally dominant) 5.75 0.6 ↔ ↔ Shopping centre (secondary) 7 -0.9 ↔ ↔ Retail warehouse (new standalone, open) 5.25 1.2 ↔ ↓ Retail warehouse (new parks, open A1) Offices 4.75 1.75 ↔ ↓ City 6 0.3 ↔ ↓ West End 5.25 1.2 ↓ ↓ City fringe/inner London 6.75 -0.6 ↓ ↓ Regional M25 towns (west and M4 corridor) 6.5 -0.3 ↔ ↓ Regional city centre 6.25 0 ↓ ↓ Out-of-town business park Industrial 6.5 -0.3 ↔ ↓ Prime single-let 6.25 0.3 ↓ ↓ Secondary multilet 7 ↔ ↓ *Implied rental growth is derived on a cashflow basis on the assumption of 15-year gilt yield plus 2%, less property yield, with rent paid quarterly in advance.