Chesterton Humberts and CEBR Report Suggests Scope for Substantial Increases in UK Prime Commercial Property Values by End of 2015

London, United Kingdom, October 03, 2010 --( A report, published by Chesterton Humberts and CEBR, suggests that UK prime property yields could fall to around 4.85% in 2014 and indicates that there is scope for a 40% rise in prime commercial property values by the end of 2015.

The "Commercial Property Values: Trends" report, which looks at the long term prospects for commercial property values in the UK, with a focus on London, gives an optimistic outlook despite short term economic uncertainty, analysing the potential upside to commercial property values due to the following factors:

- A shift in global economic power from West to East
- The likelihood of lending rates remaining low for a prolonged period due to fiscal tightening
- The underlying strength of the financial services sector

Chesterton Humberts’ head of commercial, Paul Abrey, says: “Despite adverse headlines surrounding UK real estate, our research suggests that the long term prognosis is good due to economic factors that are likely to remain in place for some time. In the short term, uncertainty surrounding Government budget cuts, the availability of credit and concern surrounding historic loan books will cause a sluggish recovery. However, our view is that there is light at the end of the tunnel as the property fundamentals improve and interest rates remain low. The prime sector in London will benefit first while the secondary sector and the regions will take longer to see significant increases in value.”

The report details the shift of economic power from West to East in recent years, which has been accelerated by the global recession. Ben Williamson of CEBR says: “This shift has consequences for levels of savings and interest rates and is likely to continue with the fiscal retrenchment that is required to tackle ballooning government budget deficits and the cost of servicing growing levels of outstanding public debts.”

Chesterton Humberts and CEBR believe that the surpluses that have been built up by Eastern countries are for the most part likely to be reinvested, with property one of the most likely havens for excess capital.

The analysis also considers that a sluggish economic recovery in the UK will encourage the Bank of England to keep interest rates at their historically low levels and that bond yields have started to decline in reaction to the planned reduction in Government debt.

CEBR argues that the gap between government bond and property yields will narrow, indicating that investors perceive property to be a safer bet than in the recent past with the prospect of increasing values as the yields on government stock remain low.

Mark Holliday, Head of Investment at Chesterton Humberts, states that: “The continued low interest environment, together with rental growth predicted in prime London commercial property means that as long as the adverse factors (already discussed) remain in check, we will see yield compression in the prime sectors. Given the UK bond yield forecast we predict that UK average property yields could fall to around 4.85% in 2014 which, together with improving property fundamentals, gives scope for a rise in prime commercial property values of up to 40% by the end of 2015.”

Focusing on London, the report considers employment levels in the key market of the City. The analysis expects that 34,000 jobs (wholesale financial services sector employment in the City of London, the Docklands and the West End of London) will be added over the course of the next five years as the finance and business services sector returns to growth.

The medium term forecast is that City employment will recover gradually from 2010, rising to 329,000 in 2012 (but still short of the 354,000 in 2007) indicating a potential upside for additional office space requirements, suggesting that occupational demand will remain resilient throughout the forecasting period.

Paul Abrey says: “We acknowledge that there are other important drivers of demand and supply that could also affect the outlook, including: inflation and the availability of credit, supply issues relating to the construction sector and the legal and administrative framework. The analysis also excludes the risk that non performing loans are called in by the banking sector and that the underlying assets are released in an uncontrolled manner, flooding the market which would be likely to impact adversely on values across the sector. To date this has not been the case but remains a risk in the short/medium term.

“However, the results of this study are encouraging and show that, in the long term, the UK’s property market will prove resilient and provide good investment opportunities due to fiscal policy and other underlying economic drivers.”


Notes to editors:

A copy of the Commercial Property Values: Trends report is available upon request from

For further information, please contact:

Kate Titchmarsh Tel: +44(0)7595673610

Paul Abrey, Chesterton Humberts Tel: +44 (0)20 3040 8245
Chesterton Humberts
Andrew Barber