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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.
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