The commercial property market has taken a battering along with the residential market following the financial crisis back in 2008, but six years on, has the commercial property market started to pick up?

The figures for the start of 2014 look encouraging, however the market does look to have changed and it will be worth considering a number of different factors before taking the plunge and purchasing a commercial property as an investment.

As expected, the retail sector is not performing as well as most others, but office premises are performing strongly. For the last 24 months, office premises have out performed all other types of commercial properties and have consistently demonstrated rental growth of around 0.2% across Great Britain, with London office premises showing a 3% rental growth, as expected.

Interestingly though, yields for office properties in the M25 area, particularly the North and East are currently out performing central London office premises. Yields across the rest of the country are static at 5.5%.

Whilst all sectors are outperforming retail, there is some positive news to be found in this sector. Following a small amount of growth in High Street retail in the North West of the UK and in London, and growth in out of town shopping centres, where commercial property has seen an increase in rental value of 0.5%, there does seem to be a small amount of relief.

One of the year’s most positive performers seems to be warehousing. Capital values are rising right across the country, with the exception of the North East and Wales, and have increased by 3%. In what appears to be a bit of a contradiction, the yields on retail warehousing have dropped dramatically but have now stabilised at about 5.5%.
In addition, industrial space yields have also fallen to around 6.5%, but capital value for industrial space have grown 16.5% in only a year. The strongest performance of industrial space is in the Midlands and the North West.

This does make for a confusing picture overall in commercial property. Whilst yields are falling, capital values seem to be rising and with some research into location and the type of commercial property popular in that area, there does appear to be opportunities in the market currently.

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