The All Property Yield has fallen for the second consecutive quarter and is now at its lowest for two and a half years. Gilt yields fell by 0.3% points as the abolition of tax credits on UK equity dividends, strong sterling and the Bank of England's operational independence with consequent perceived effect on inflation, have increased the asset's attraction. There is, as yet, little evidence of any effect of the July Budget's stamp duty increase on average yields. With the equities market performing strongly, all share yields fell to 3.4%.

As in the previous quarter, the 0.2% point fall in Retail yield is concentrated in the prime end of the market. The 0.2% point fall in Central London took yields to a level last seen eleven years ago, illustrating investor confidence in the strength of the current consumer-led recovery. Across the regions, decreases were not as great as in the previous quarter. In Scotland, inertia characterised even the larger towns.

The Office sector is yet again seeing little movement as investors continue to be cautious. However, supply constraints and continued investor competition in the West End and Holborn and Marylebone have finally led to 0.1% point falls in yields over the quarter. Investor activity in provincial cities has been mainly confined to the out-of-town office park market, with only two exceptions.

As expected, the Industrial sector could not sustain the extent of yield falls seen in the previous quarter. However, downward pressure is evident across several regions. Despite the difficulties encountered by the manufacturing sector, several regions are registering yields which are three-year lows. However, Scotland is lagging the rest of the country with only a marginal downward movement in the last year.

Average Yields       Aug   Nov   Feb   May   Aug   Nov   Feb   May
                     95    95    96    96    96    96    97    97

Shops                6.5   6.6   6.7   6.9   6.9   6.9   6.9   6.7
Offices              6.9   6.9   6.9   6.9   6.8   6.8   6.8   6.8
Industrial           8.5   8.5   8.5   8.4   8.4   8.4   8.4   8.1
All Property         7.5   7.5   7.6   7.7   7.7   7.7   7.7   7.5
Gilt Yield           8.4   8.2   7.9   8.3   8.2   7.9   7.4   7.5
Equity Yield         3.9   3.9   3.7   3.7   3.9   3.8   3.5   3.6


AVERAGE YIELDS (figures are rounded to 1 decimal place)


                   Aug   Nov   Feb   May   Aug   Nov   Feb   May
                   1995  1996  1996  1996  1996  1996  1997  1997

All Shops          6.5   6.6   6.7   6.9   6.9   6.9   6.9   6.7
Central London     5.2   5.2   5.2   5.2   5.2   5.2   5.1   5.0
Inner Sub London.  9.1   9.1   9.2   9.4   9.4   9.4   9.4   9.1
Outer Sub London   7.4   7.4   7.5   7.7   7.7   7.7   7.6   7.4
Suburban London    8.2   8.2   8.4   8.6   8.6   8.6   8.5   8.3
London             7.0   7.0   7.0   7.1   7.1   7.1   7.1   6.9
South East.        6.0   6.0   6.1   6.5   6.5   6.5   6.5   6.2
South West.        5.6   5.6   5.7   6.0   6.0   6.0   6.0   5.8
East Anglia.       5.7   5.7   5.9   6.1   6.1   6.1   6.1   5.9
East Midlands.     6.2   6.2   6.3   6.6   6.6   6.6   6.5   6.3
West Midlands.     5.4   5.4   5.5   5.7   5.8   5.8   5.8   5.8
Wales.             6.8   6.8   6.9   7.2   7.2   7.2   7.2   7.0
North West.        6.0   6.0   6.0   6.3   6.3   6.3   6.3   6.1
Yorks & Humbs      6.0   6.0   6.2   6.4   6.4   6.4   6.4   6.1
North.             6.2   6.2   6.3   6.4   6.4   6.4   6.4   6.2
Scotland.          6.4   6.4   6.5   6.5   6.5   6.5   6.5   6.4

All Offices        6.9   6.9   6.9   6.9   6.8   6.8   6.8   6.8
West End           5.3   5.3   5.3   5.3   5.3   5.3   5.3   5.3
Holborn/
Marylebone.        6.8   6.8   6.8   6.8   6.8   6.8   6.8   6.8
Central City       5.3   5.3   5.3   5.3   5.3   5.3   5.3   5.3
Fringe City        7.0   7.0   7.0   7.0   7.0   7.0   7.0   7.0
Central London     5.8   5.8   5.8   5.8   5.8   5.8   5.8   5.8
Suburban London    6.9   6.9   6.8   6.8   6.8   6.8   6.8   6.8
London             6.1   6.1   6.1   6.1   6.1   6.1   6.1   6.1
South East.        6.8   6.8   6.8   6.8   6.8   6.8   6.8   6.7
South West.        7.5   7.5   7.5   7.5   7.5   7.5   7.5   7.5
East Anglia.       7.3   7.3   7.3   7.3   7.3   7.3   7.3   7.3
East Midlands.     7.8   7.8   7.8   7.8   7.8   7.8   7.8   7.8
West Midlands.     7.3   7.3   7.3   7.1   7.1   7.1   7.1   7.1
Wales.             8.3   8.3   8.3   8.2   8.2   8.2   8.2   8.2
North West.        8.1   8.1   8.1   8.0   8.0   8.0   8.0   8.0
Yorks & Humbs      7.5   7.5   7.5   7.4   7.4   7.4   7.4   7.4
North.             8.3   8.3   8.3   8.2   8.2   8.2   8.2   8.2
Scotland.          6.7   6.8   6.8   6.8   6.9   6.8   6.8   6.9

All Industrials    8.5   8.5   8.4   8.4   8.4   8.4   8.4   8.1
London             7.8   7.8   7.8   7.7   7.7   7.7   7.6   7.4
South East.        7.5   7.5   7.5   7.5   7.5   7.5   7.5   7.2
South West.        8.2   8.2   8.2   8.2   8.2   8.2   8.2   7.9
East Anglia.       8.2   8.2   8.2   8.2   8.2   8.2   8.2   7.9
East Midlands.     8.0   8.0   8.0   7.9   7.9   7.9   7.8   7.6
West Midlands.     8.2   8.2   8.2   8.1   8.1   8.1   8.1   7.8
Wales.             8.6   8.6   8.6   8.6   8.6   8.6   8.5   8.3
North West.        8.5   8.5   8.5   8.3   8.3   8.3   8.3   8.0
Yorks & Humbs      8.4   8.4   8.4   8.3   8.3   8.3   8.2   8.0
North.             8.8   8.8   8.8   8.8   8.8   8.8   8.8   8.6
Scotland.          8.8   8.8   8.9   9.0   9.2   9.2   9.2   9.1

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