Returns generated by office space to let in
Central London increased from 0.5 per cent in February to 0.6
per cent in March, according to figures published by CB Richard
Ellis (CBRE).

CBRE believes the Central London sector is continuing to
outperform the UK commercial property sector as a whole, with
overall returns totalling just 0.1 per cent last month. The capital
was the only market in the country where capital values increased
last month by 0.2 per cent.

Nick Parker, senior analyst of economics and forecasting at
CBRE, said: "There is no doubt that a prevailing weak economic
climate for the UK is hampering the commercial real estate sector,
with values faltering as a result of investors being cautious over
occupier market prospects."

Investment Property Databank (IPD) recently conducted research
into the effect the length of a commercial lease can have on the
overall value of business premises. The conclusion of their
findings was that commercial properties where tenants have a
five-year lease in place as opposed to something longer will see
their average value fall by as much as 1.8 per cent.

In comparison those properties with agreed lease terms of 20
years or more can see around five per cent added to the value of
the asset.

Andrew Gerrity, client manager at IPD, said: "While the impact
of vacancies on values is higher, landlords need to be aware that
signing shorter leases is not necessarily a guarantee of value
protection, although it generates a higher yield initially, holding
out for a tenant on a longer lease is more profitable in the long
run."

In a bid to fill premises an increasing number of investors are
signing tenants on long term contracts with an initial promise of
reduced rates at the beginning of the lease period to attract
occupants.

—