Savills : UK prime commercial property yields harden and capital growth stabilises - Savills

Average UK prime yields have continued to fall since peaking in summer 2016 and capital values have stabilised despite the impact of the UK's vote to leave the EU, says Savills.

Overall, UK prime yields ended 2016 just 22 basis points (bps) higher than at the end of 2015 after peaking at 35 bps higher during August 2016. According to Savills latest Market in Minutes report, regional hotel yields experienced their first fall since April 2015, dropping from 5.5% to 5.25% in December, while yields on restricted retail warehouses have returned to 5.75%, where they were in January 2016, after peaking at 6.0% in December 2016.

Annual capital values are still falling, but the rate of decline has levelled off. Savills predicts that positive annual growth is likely to be seen by the end of the summer.

See the full Market in Minutes report and graphs here

Mark Ridley, CEO of Savills UK and Europe, says: 'Overall, despite the global political events of the past eight months, with more European elections to come, the attractiveness of UK commercial property as a fundamentally safe asset class to all types of buyers continues. Competition for the best assets remains strong with demand often exceeding supply, hence why we expect to see capital value growth turn a corner.'

Steve Lang, director in the commercial research team at Savills, adds: 'Assessing monthly and annual change in investment performance provides the best indicator of where the short-term trend is heading.'