Investment in commercial Property in the UK has increased by 1% in the first half on 2017 to reach £27.2 billion.

According to the latest analysis report from Savills, average prime yields have remained static in June at 4.7% as a result of ongoing uncertainty caused by the general election.

Total returns are forecast to be around 5.5% for commercial property in 2017 and improve throughout the next five years.

Offices have proved to be the most popular sector and make up 39% of investment in the first half of 2017. Investment was split 50/50 between the capital and the rest of the UK.

Food stores, M25 offices, regional offices, retail warehouses, industrial distribution and industrial multi-lets are all sectors that could still see yields harden marginally by the end of the year, according to Savills.

Continued overseas investment in to the UK property market is expected to maintain current pricing while the gap between yields for prime and average commercial property is approximately 160 basis points currently.

This is close to the 10 year average of 180 basis points.

“UK commercial property is in good health, with investors continuing to be attracted by its underlying strengths, with overseas buyers additionally benefiting from the current currency discount. Indeed, volumes in the first half could have been higher, but have been held back by a lack of sellers, rather than any reluctance from buyers,’ said Richard Merryweather, joint head of UK investment at Savills.

“Indeed, in June we observed that a major US pension fund is looking at a build to core strategy in the UK, looking to make physical improvements or agree new leases in order to move assets into core, demonstrating the willingness for some funds to move along the risk curve in order to access UK stock,” he said.

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