Building Cost Update, Q4 2012
Over the last six months UK economic output has grown slightly, but occupier demand remains weak and rental values continue to fall outside London and the South East in all sectors. Prime rental values are generally stable but secondary values continue to fall slightly at much the same rate as six months ago.
Investment activity remains at much the same level as it was six months ago and at much the same level as it has been over the last two to three years, with much stronger activity in central London than elsewhere, boosted by increasingly strong overseas interest. Over the last six months prime property investment yields have generally not altered, but secondary yields have increased noticeably. As a result, prime capital values remain stable whereas there has been a strong decrease in secondary capital values due to falling rental values and rising yields.
Weak occupier demand, flat prime rental and capital value growth in addition to little change in tender prices mean that development viability has not improved outside London. New commercial development activity is reasonably healthy in London, but not elsewhere. New commercial construction activity has been at a stable level over the last 12 months, but remains weaker than it was at the depth of the recession in 2008/2009 and only about a third of its 2007 peak.
Return to top ↑