Commercial property values prompt fears of a bubble

Telegraph
By Graham Ruddick, City Reporter (Automotive, Healthcare, Property)
Published: 7:56PM GMT 06 Nov 2009

Concerns that the UK property market is entering a bubble have been exacerbated after new data showed yields have returned to 2006 levels after seeing their biggest monthly decline since 1993 in October.

Yields, which measure rental returns against the value of a property and are a useful barometer of risk appetite, fell below 5pc for prime retail properties in October, below 6pc for offices, and 7pc for industrial property, according to BNP Paribas Real Estate. An overall fall of 35 basis points was the biggest since 1993, Cushman & Wakefield said.

There are fears that property values are recovering too quickly because of a lack of supply and strong overseas demand.

Segro, the warehouse owner, on Friday sold its Great Western Industrial Park in Southall, West London for £110.4m to the Universities Superannuation Scheme at a yield of 6.9pc.