UK commercial property market yields have stabilised as post lockdown investment activity picked acutely from June 2020. Investor evaluations of imbalances between available supply and occupier demand, as well as emergent social trends, have led to an uptick in investment volumes underpinned by appreciations in three-year capital value expectations in the office and industrial sectors as reported by the Royal Institution of Chartered Surveyors.

Savills’ market update research catalogued a 42 per cent increase in investment activity between May and June 2020 as the all sector prime yield remained stable at 5.21 per cent in June. This equated to June’s investment volumes rising to £1.3bn, compared to £755m in May; and took total volumes for the first half of 2020 to £15.6bn. The prime yield then rose to 5.23 per cent in July - its highest level since September 2013.

Concurrently supply is 9 per cent below the five-year average, with the vacancy rate at 5.9 per cent compared to the long-term average of 8.2 per cent. The Grade A office vacancy rate presently sits at just 3 per cent and average Grade A rents rose by 5 per cent in the first half of 2020 when compared to the five-year average. Even with the possibility of short-term volatility in headline rents arising from a potential second wave, the long-term commercial outlook is positive. A severe undersupply of Grade A office space is epitomised by just 1.5 million sq ft of available space under construction and scheduled to complete before the end of 2021. This is equivalent to five months of take-up in an average year.

Investors attuned to these supply constraints are incorporating behavioural trends in their analysis, with long term trends in the London office market enabling the capital to quickly adapt to an evolving post-lockdown landscape.

Strawberry Star’s uniquely positioned commercial strategy, incorporating Grade A locations such as Sky Gardens in Vauxhall and Hoola in the Royal Victoria Docks, has facilitated investment opportunities since 2007. Contact our Commercial team to understand our Commercial investment opportunities - Richard Nelson, Commercial Asset Manager, richard.nelson@strawberrystar.com