UK commercial property delivered annual total returns of 8.1% in 2011, according to CBRE.
The agency said that despite declining market momentum as the year progressed, total returns were healthy.
Total returns in December were 0.5%, with no overall movement in capital values, according to CBRE’s latest Monthly Index.
Central London office and retail warehouse returns held up at 0.8% and 0.7% respectively, but there was further weakness in all other market subsectors where values fell over the month. Central London offices and retail warehouses were also the best performing subsectors over the year with total returns of 12.7% and 9.0% respectively.
The office sector in outer London/M25 and the rest of the UK under-performed over the month with total returns of 0.1% and no change, respectively. In both cases, the income return was largely or wholly offset by declining capital values. These were also the weakest performing subsectors annually, with total returns of 4.8% and 3.3% respectively.
Rental values were unchanged in December, as growth in central London offices was offset by declines across the retail sector. Rental values were flat over 2011 as a whole.
David Wylie, head of economics and forecasting at CBRE, said: “The 8.1% total return for the UK commercial property market this year was a respectable performance given the broader economic background, and compares favourably with the other main asset classes. Returns were largely due to income, however, as capital growth of 1.9% over the year was fairly modest, and confined to the first six months of the year.
“Performance across different parts of the market, and more importantly across different grades of property, was very skewed in 2011, with strength in central London offices and prime assets in particular helping to offset weakness elsewhere.”
