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News Release

London

Offices sector records strongest quarterly returns as market continues to be mixed

According to Jones Lang LaSalle’s Q2 2012 UK Property Index


​Jones Lang LaSalle has published its Q2 2012 UK Property Index which highlights that the office sector recorded the strongest quarterly returns at 1.0% in Q2 followed by the industrial sector at 0.3% and retail at 0.0% as foreign investors continue to target prime office stock.

Mike Penlington, director in Jones Lang LaSalle’s Valuation Advisory team, said:  “The Jones Lang LaSalle Style Index highlights the continuing re-pricing of secondary assets relative to prime in light of poor economic prospects. We expect this polarisation to continue as caution in the investment market will lead to a focus on prime assets.”

Other key highlights from Jones Lang LaSalle’s research include:

• All Property Total Returns fell to 0.4% in 2012 Q2 compared with 0.7% in 2012 Q1, as capital values declined at their sharpest rate since 2009 (-1.3% against -1.0% in Q1).

• Annual returns for 2012 to date were 4.3%, a significant drop from 2011 Q2 figure of 9.1%. Growth was supported by income as capital values suffered from outward yield movement and there was a lack of rental value growth.

• Equities were the weakest performing asset as investors preferred the relative safety of gilts in light of the continued Eurozone debt crisis. In 2012 Q2 returns were -2.6% compared with 6.0% for gilts and 0.4% for property.

• All property rents were flat in Q2, as office rental growth was dragged down by falls in other sectors (-0.4 for retail and -0.2 for Industrial).

• The Jones Lang LaSalle “style index” highlights a continued discrepancy in investment performance between prime (growth) and secondary (value) assets. In 2012 Q2, annual returns were 7.0% for growth and just 0.1% for value properties, as the UK secondary market continues to see the sharpest capital declines.