■ June saw the average prime yield harden from 4.98% to 4.84%. This is the largest monthly downward shift in yields since early 2010, and it was predominantly driven by the retail sector.

■ Four out of six retail subsectors saw a quarter point hardening in yields this month, though Foodstores saw a quarter point rise in yield due to concerns about long-term interest in the sector from the annuity funds.

■ Amongst the office and industrial sectors, only M25 Offices and Industrial Multi-lets saw a hardening in their prime yield this month.

■ The rise in investor interest in retail property is being driven by several factors. Firstly, there is a rising acceptance that the retail economy is improving. While real average earnings growth is still flat, consumer confidence is now at its highest level since 2005, and retail sales growth is recovering.

The second reason is the increasing acceptance that the structural change in retailing that has been driven by the rise in internet sales is not a terminal issue for traditional retailers. The proportion of retail sales that is being spent on the internet is still rising, but so is the volume that is being spent in-store. The days of the argument being clicks versus bricks have now passed as retailers and landlords have got used to an omni-channel world.

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■ We expect to see continuing investor demand for retail assets, particularly dominant shopping centres and bulky goods retail warehouse parks.

■ Generally the first half of 2014 has seen better than expected capital value growth across all sectors. This is particularly true outside London. As a result of this we have revised our forecasts for this year upwards, with prime capital growth on all sectors expected to average 10% this year, before slowing to 4.4%pa over the next five years.

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Taken from
Market in Minutes: UK Commercial - July 2014