Savills reports that cross-border investment into UK commercial property touched $14 billion in the first six months of this year, with the country attracting more capital than the USA or any of its European peers
UK commercial investment volumes and values will start to improve shortly, says Savills, after the Bank of England base rate cut this month.
Savills reports that cross-border investment into UK commercial property touched $14 billion in the first six months of this year, with the country attracting more capital than the USA or any of its European peers.
While an element of caution will remain among the most circumspect investors until after the new government’s first budget in October, Savills says that an initial interest rate reduction and growing confidence about the economic fundamentals have led to an inflection point for most buyers now being reached and more capital will be deployed in the fourth quarter.
The average UK prime commercial property yield stayed steady at 6.07% in July, according to Savills, but it expects yield hardening from the fourth quarter of 2024 after a predicted further 25 bp interest rate reduction in November and in expectation of further cuts coming in 2025.
We are seeing rising confidence in the UK’s economic fundamentals which should drive tenant demand and feed through into yield hardening from the end of the year, says James Gulliford, joint head of UK commercial investment at the agency.
For the first time since 2017 all of the main MSCI average rental growth indices are showing positive year-on-year growth, with the biggest swing in recent months being in retail rental value. As the typical retail rental cycle is still underway, with rents now rebuilding after previously declining when they reached affordability peaks, retail rents now join prime industrial and offices in seeing consistent rental growth, he added.
