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Cluttons Reports That Commercial Real Estate Continues to Show Strong Performance

Cluttons Reports That Commercial Real Estate Continues to Show Strong Performance
25 July 2022

Quarterly figures from Cluttons show the commercial property market’s continued strong recovery – but how long can this realistically last?

Despite a landscape of post-COVID recovery, “All Property” total returns have increased to 23.9 per cent over the last 12 months to the end of March 2022, compared to 19.9 per cent in the 12 months to end December.

The strong performance is largely due to an uptake in leasing deals in the industrial and logistics sector.

Despite this, Cluttons warns that the ensuing likely economic recession, higher inflation and interest rates, post-Brexit repercussions, and war in Ukraine are likely to slow the pace of growth in capital values.


Cities Struggling to Maintain ‘Destination Status’ as Home Working Maintains Popularity


As companies show signs of accepting home and hybrid working as the status quo, more businesses are seeking to move operations remotely. Performance data indicates that secondary office space on shorter leases is in danger of being left empty, with office occupiers focussing on Grade A energy-efficient space.

Indeed, London Underground travel into central London midweek has steadied at between 60 per cent to 67 per cent of pre-pandemic levels, with a significant rise on Thursdays.

Consequently, previously high-footfall areas such as Oxford Street in central London are struggling to retain their “destination status”.  Retail rental values in Central London have fallen 18 per cent since the start of the pandemic in part due to a significant lack of spending in nearby shops, cafés and restaurants.

Jamie McCombe, Head of Cluttons Investment Management, said: “Employers need to give workers a reason to want to be in the office and that means the very best properties that provide experiences that workers cannot get elsewhere will prosper and those that don’t match up may very well become obsolete. Landlords need to start working much harder for their asset to measure up, rather than rely on location if they want to retain values and outperform in a difficult market.”

Picture: a photograph of a group of colleagues gathered at a meeting table. One person is using a laptop. Image Credit: Pexels

Article written by Ella Tansley | Published 25 July 2022


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