Commercial Property

Remains Good Long-Term Investment.

Although “there are few indicators of direction, sentiment is generally favourable for the commercial property market, seeing good, steady value for longer-term investors”, says Charles Hunter, Head of Property Investment at Clerical Medical.

He continued, “Whilst turnover is rarely high in the property sector, it is not unaffected by the worries of financial markets, with January and February having been, for the most part, fairly quiet. The strong rental growth that characterised South Eastern office markets in 2000 is not so evident now, with some of the demand drivers having taken a back seat (i.e. US and other overseas TMT companies). Nevertheless there are still only modest amounts of supply, and with almost any level of historic take up, it is difficult to project any fall in rents.

“There is some evidence of direction in the busier central London office markets. Although the competition that led to near-£100 rents in the West End is now absent, rents for older buildings and some outside the prime areas are still growing at expected trend levels. In spite of the current pause, we expect resumption of 3-6% average rental growth over the next year in office markets.

“Retail markets remain weak, although high streets appear to have been generally busier in the first three months of the year.

“There have been no strong trends in the property market so far this year. UK institutions are in the market, but there are fewer separate operators to drive competition. There is, however, stronger interest from geared private investors, boosted by the availability of bank finance. Overseas interest remains, but in the short term, overall, it seems to be more of a buyers’ market than it was six months ago.”

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