UK prime property yields continued to fall in November thanks to strong investor demand and a shortage of buying opportunities.

Cushman & Wakefield’s latest update on the UK property investment market shows that prime yields dropped 38 basis points to an average of 6.2% in November. Yields fell in 22 of the 25 office, retail and industrial sub-sectors tracked by Cushman, led by a 75 basis points fall in Thames Valley office properties to 6.5%.

Equity continues to flood in from all quarters - our market knowledge suggests that there have been at least 100 individual buyers for the 114 deals seen in London's West End market so far this year for example - and we are firmly in a sellers market,” said Cushman’s head of UK capital markets David Erwin.

This will not suddenly disappear after Christmas. Both the unallocated capital and the market view that property pricing remains relatively attractive suggest the rally will push on into 2010.”

David Hutchings, Cushman’s head of European research, said: “The key to whether this rally becomes a bubble is to be found not so much in the speed of the recovery but in the degree to which it spreads away from prime stock, and it will be how investors chose to price risk that determines the success of their decision-making.

This is underscored by current market trends, which clearly point to a very marked degree of polarisation in the occupational market - with betters signs of demand and hopes for increasing price stability in 2010 for modern, quality stock, but rising availability and continuing threats to income security for anything of a lesser grade.”

See today's Property Week (Intelligence, p40) for more on Cushman's prime yields research

0 See p40, briefing intelligence for more.