■ With August being a traditionally quiet month for investor activity, only one sector saw a hardening of yields, with Leisure Parks moving in by 25 basis points to reach 5.5%.

■ As a result the UK average prime yield moved lower by two basis points during August to 4.75%. Downward trend arrows now only apply to a small number of markets. For many sectors the prime yield is now at levels not seen since early 2007.

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■ As confidence in the regional office occupational market has grown, investor sentiment has also shifted towards these markets. On an annual basis provincial office yields have come in by 75 basis points with further hardening expected.

■ Analysis by Savills shows that £18.7 billion has been invested in the UK commercial property market at the midpoint of 2014, up from £15.2 billion at the halfway point of the year. Interestingly 51% of the market is now in the regions compared to London, at the midpoint of 2013, just 34% of the market was outside of London.

■ In the August issue of Market in Minutes, we suggested that the regional markets will come to the fore to absorb the inflow into the property funds, and this has clearly now begun.

■ UK institutions have now started to move up the risk curve to take advantage of the differential between London and regional yields (which in some sectors is normalising fast), as well as to capture the beginnings of the regional leasing market recovery. UK institutions now account for 43% of all investment outside of London compared to just over a third in 2012. We expect this trend to continue into the final quarter, with many institutions reporting significant shortfalls between what they have spent and what they wish to deploy this year.

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Taken from
Market in Minutes: UK Commercial September 2014