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01 Oct 2012

Investor Demand For Diverse Income Supports UK Alternative Property Sector

The sector of alternative commercial property in the UK has benefited from investors' appetite for more diverse and secure income, with capital values falling less than in the traditional sectors so far this year, the latest monthly index of commercial property services firm CBRE showed last week.

Values in the category "All Other" property have declined by just 0.9% in the year to date, compared with a total drop of 2.9% in capital values for UK commercial property as a whole in the period.

CBRE's senior analyst of economics and forecasting, Nick Parker, said that some of the assets in the alternative sectors provide more annuity style secure income streams for investors, which is what investors have been looking for since capital values faltered last year.

Assets in this category do not tally with the profiles of the three traditional sectors and include car showrooms, gyms, cinemas as well as high-tech datacentres. The diversity of assets in this sector makes it difficult to compare with others but "alternative" assets have definitely performed better than all other asset classes so far in 2012, Parker noted.

Meanwhile, investors' focus on prime assets has helped the market for Central London offices see a 1.2% rise in values in the year to date, in turn stabilising All Office values across the UK, which have lost only 1.7% this year. Overall, commercial property values in the country fell by 0.3% in August, while total returns were 0.2%. Total returns in the sector stood at 0.9% in the first eight months of the year.

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