The IPD All Property initial yield fell another seven basis points (bp) in July, from 5.56% to 5.49%, or 48bp over the last eight months.
According to Citigroup Property Analysts the result was due to investment demand across all sectors driving yields lower with record yields being achieved.
A Citigroup spokesperson said: “The All Property yield shift was significantly influenced this month by the office and industrial sectors, which fell 7bp and 13bp respectively, with retail initial yields falling below 5% to 4.96% for the first time since 1989.”
All Property rental growth of 2.5% continued to drive annual returns of 17.3% with retail rental growth (4.1%) still the strongest, while industrial (1.1%) and offices remained flat.
Over the last one, three and six months industrial assets have been the best performers with London and South East assets best in class, implying above average returns.
The property yield premium to gilts reduced to 116bps from 138bps last month.
However, property remains the best performer over gilts and equities over the last three, five and 10 years.
For the full breakdown of the IPD monthly index see this week’s Estate Gazette.
References: EGi News 16/08/05
