Commercial Property agent CBRE anticipates subdued market for the remainder of 2012
Commercial Property agent CBRE says investment returns in the first quarter of 2012 have fallen to their lowest figure since the second quarter of 2009.
CBRE's Scottish Property Quarterly report found total returns for all property in Scotland fell to 0.1 per cent from 0.5 per cent in the last quarter of 2011 - representing the lowest quarterly figure since the second quarter of 2009 when total returns were negative.
The report states both rental and capital values fell on a quarterly basis for the fourth consecutive quarter.
CBRE's report found, whilst the pace of the rental value decline has been relatively stable over the past few quarters at an average of -0.5 per cent, the severity of the decline in capital values is increasing.
Capital values fell by 1.4 per cent in the first quarter of 2012 for all Scottish property compared with 1.0 per cent in the fourth quarter of 2011 and 0.1 per cent in the third quarter of 2011.
Industrial was once again the best performing sector in Scotland with quarterly total returns of 0.8 per cent, a decrease on the 1.1 per cent seen in the last quarter of 2011.
Total returns were down on the same period last year due to a 0.8 per cent drop in rental values and a 1.0 per cent fall in capital values on last year.
Retail was the worst performing sector in Scotland in the first quarter of 2012 with total returns of 0.1 per cent, with rental values falling to minus 0.5 per cent and capital values dropping to minus 1.6 per cent.
CBRE said retail in Scotland has now experienced two consecutive quarters of falling capital values and 15 consecutive quarters of falling rental values.
And the picture is far from rosy in the Scottish office market, posting its second straight quarter of negative total returns.
However the fall is less severe than in the previous month, at minus 0.1 per cent compared with minus 0.4 per cent the previous quarter.
The office market in Aberdeen, which is enjoying a boom in activity in the oil and gas sector, is currently experiencing record high levels of demand and helped to lift the Scottish quarterly figures.
Office capital values in Scotland have now fallen for the last seven quarters with the past two quarters each showing capital growth of minus 1.7 per cent, though rental values rose by 0.1 per cent, turning a trend of falling rental values over the previous seven consecutive quarters.
A total of £305 million was transacted in the Scottish property investment market in the first quarter of 2012, an increase of 13 per cent on the previous quarter and 12 per cent on the same period a year ago.
But despite the increase in the value of transactions, the first quarter of 2012 saw the smallest number of deals – 25 - since the third quarter of 2009 – 15 – which CBRE suggests points to a larger than average lot size.
The largest transaction of the quarter was the £90m purchase of Ocean Terminal in Edinburgh by Resolution Property representing a yield of 7.5 per cent.
Aileen Knox, senior director of CBRE Scotland, said: “Overall, Q1 2012 continues to follow the trend from Q4 2011 with performance remaining subdued.
“We anticipate that this is likely to continue for the remainder of 2012.”