Richard Ellis St Quintin Monthly Index, December 1999

Citation

(2000), "Richard Ellis St Quintin Monthly Index, December 1999", Property Management, Vol. 18 No. 4. https://doi.org/10.1108/pm.2000.11318dab.021

Richard Ellis St Quintin Monthly Index, December 1999

Richard Ellis St Quintin Monthly Index, December 1999

Keywords: Market report, Property returns

All property total returns reached 13.5 per cent in the year to December 1999 (Table XIII) on the Richard Ellis St Quintin Monthly Index (Table XIV). This was two full percentage points better than the annual return in December 1998 and a much stronger outcome than expected at the start of last year. After a weak first quarter, capital values picked up to produce 5.7 per cent growth over 1999 as a whole, broadly in line with rental value growth at 5.6 per cent (Figures 17, 18 and 19).

Figure 17. Capital value change to December 1999

Figure 18. Rental value change to December 1999

Figure 19. Total return to December 1999

Property put in a strong fourth quarter performance in 1999 with total returns running at an annualised rate of 15.7 per cent, up from 13.5 per cent in the third quarter. The three-month annualised capital growth rate rose to 8.1 per cent from 5.8 per cent in the previous quarter (Table XV and Figure 20). These short-term indicators suggest that property returns are likely to move further into the mid-teens in the early part of 2000.

Peter Damesick, Head of UK Research, said:

The consensus forecast at the start of 1999 was for single figure returns last year, but the economy's strong rebound from its soft landing restored investor confidence and underpinned tenant demand, producing firmer yields and continued rental growth. With the economy now expanding above trend and the average economic forecast showing 3 per cent GDP growth in 2000, the prospects for property this year look good, although the secondary market will have to cope with higher interest rates.

Industrials again topped the performance league in 1999 with total returns of 15.1 per cent. Falling yields in the fourth quarter helped push annual capital growth for industrials to 6.4 per cent in December.

Offices performed in line with the sector average in 1999 with 13.5 per cent total returns, up from 12.4 per cent in 1998. Office rental growth slackened to 5.6 per cent in 1999 compared to 10.8 per cent the previous year.

High street shops put in a strong finish to the year with annual rental growth improving to 6.1 per cent by December, up on 1998's 4.7 per cent. Capital growth jumped from 2.2 per cent in 1998 to 5.8 per cent last year, boosting total returns to 13.0 per cent, against 9.4 per cent in 1998.

Table XV. Richard Ellis St Quintin short-term indicator, December 1999

Figure 20. All property short-term indicator to December 1999

Table XVI. Year to date performance, December 1999

Figure 21. Year to date - sector returns, December 1999

Retail warehouses recorded a sharp turnround in performance during the year. A very poor first half rental performance took total returns to a low of 8.3 per cent in June 1999. The sector rallied in the second half to show annual returns at 12.7 per cent by December, but this still left retail warehouses trailing the other sectors in 1999.

All property finishes the year strongly

All property capital growth performed well over the final month of 1999 with annual growth climbing to 5.7 per cent from 5.1 per cent the previous month. The monthly capital growth for all property was slightly lower than November, which resulted in a slight drop in the short-term capital growth indicator from 8.3 per cent to 8.1 per cent. Annual capital growth improved in all sectors, with high street retail showing the largest rise from 4.9 per cent to 5.8 per cent in December (Figure 17).

Annual rental growth for all property crept up slightly over the month to 5.6 per cent, mainly due to the rise in annual office rental growth to 5.6 per cent, as well as a marginal rise in high street retail rental growth. Industrial and retail warehouse annual rental growth, however, dropped back slightly over the month (Figure 18).

Total return for all property in 1999 was 13.5 per cent, much better than many predicted at the start of the year. All sectors showed reasonable improvements in annual return during December, most notably high street retail rising from 12.1 per cent to 13.0 per cent. Industrials finished 1999 as the top-performing sector with an annual return of 15.1 per cent, with retail warehouses in bottom place at 12.7 per cent (Figure 19).

The year to date performance up to December 1999 is shown in Table XVI and Figure 21.