UK

UK Property
Index
Q3 2016
Executive
summary
Key points
• Post Brexit, quarterly property returns over Q3 2016 were -0.9%, bringing the total return over the past 12
months to 5.3%
• A declining yield impact combined with a steep fall in rental growth led to negative capital value growth in Q3
• The industrial sector showed the strongest performance over the quarter, returning 1.0%. Returns in the office
and retail sector were negative in Q3, at -1.8% and -1.2% respectively
• Rental values declined by -2.2% over Q3 as all sectors recorded negative rental growth, bringing annual rental
growth to -1.1%
• Secondary properties edged out prime properties in Q2, with total returns on higher yielding ‘value’ properties at
1.8% compared to 1.7% for ‘growth’ properties
• Looking at other asset classes, equities saw the largest gains over the quarter at 7.8%, and gilts recorded 3.4%
returns over the quarter
• London underperformed relative to the rest of the country, returning -1.0% compared to -0.7% in rest of UK
Property index
Property performance (%)
All property Total returns Capital value growth ERV growth Net income
Second quarter 2016 1.7% 0.3% 0.3% 0.3%
Third quarter 2016 -0.9% -2.3% -2.2% 0.5%
Annual to September 2016 5.3% -0.5% -1.1% 3.2%
Total return (%)
All property vs. other asset classes All property 15 year gilts FTSE all share
Second quarter 2016 1.7% 6.5% 4.7%
Third quarter 2016 -0.9% 3.4% 7.8%
Annual to September 2016 5.3% 14.6% 16.8%
Yields (%)
All property vs. other asset classes All property income yield 15 year gilts gross redemption yield FTSE all share dividend yield
Second quarter 2016 5.5% 1.3% 3.7%
Third quarter 2016 5.7% 1.0% 3.5%

Components of total return (income return vs. yield impact vs. rental growth)
15 Income return
Yield impact
Rental growth
10
5
0
-5
-10
-15
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Performance by sector
Total returns by sector (%)
Office Retail Industrial
Second quarter 2016 1.9% 1.4% 2.0%
Third quarter 2016 -1.8% -1.2% 1.0%
Annual to September 2016 5.8% 3.1% 8.4%
Capital growth by sector (%)
Office Retail Industrial
Second quarter 2016 0.6% -0.1% 0.5%
Third quarter 2016 -3.0% -2.7% -0.5%
Annual to September 2016 0.5% -2.7% 2.2%
Rental growth by sector (%)
Office Retail Industrial
Second quarter 2016 0.6% -0.1% 0.5%
Third quarter 2016 -3.0% -2.6% -0.5%
Annual to September 2016 -0.3% -3.1% 1.1%

Office, retail and industrial – income yield
%
9
8
Office
Retail
Industrial
7
6
5
4
Q1 2006
Q1 2007
Q1 2008
Q1 2009
Q1 2010
Q1 2011
Q1 2012
Q1 2013
Q1 2014
Q1 2015
Q1 2016
Style index
Property returns by investment style (%)
Prime (growth) properties Total returns Capital value growth
Second quarter 2016 1.7% 0.4%
Third quarter 2016 -0.8% -2.0%
Total Returns by Sector (%)
Annual to September 2016 5.2% 0%
Secondary (value) properties Total returns Capital value growth
Second quarter 2016 1.8% 0.0%
Third quarter 2016 -1.2% -3.0%
Annual to September 2016 5.6% -1.7%
Investment style – income yield
%
10
9
8
Spread
Growth
Value
7
6
5
4
3
2
1
0
Q1 2005
Q1 2006
Q1 2007
Q1 2008
Q1 2009
Q1 2010
Q1 2011
Q1 2012
Q1 2013
Q1 2014
Q1 2015
Q1 2016

Returns - London vs. rest of UK London London & South East Rest of UK
Second quarter 2016 2.0% 1.9% 1.7%
Third quarter 2016 -1.0% -1.0% -0.7%
London vs. London South East vs. rest of UK
7%
6%
London
LON + SE
Rest of UK
5%
4%
3%
2%
1%
0%
-1%
-2%
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
Q4 2013
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q1 2016
Q2 2016
Q3 2016
Definitions
Based on existing practices in the equity market JLL constructed a style index to analyse the performance of two investment styles, prime
(growth) and secondary (value) distinguished by income and defined by their yields as follows:
• a prime (growth) property is a low yielding property
• a secondary (value) property is characterised by high yields
Index does not include Capital Expenditure.
Contacts
Himanshu Wani
Associate Director
UK Research
30 Warwick Street
London
W1B 5NH
+44 (0)207 087 5142
himanshu.wani@eu.jll.com
Mike Penlington
Director
Valuation Advisory
30 Warwick St
London
W1B 5NH
+44 (0)20 7399 5833
mike.penlington@eu.jll.com
UK Property Index – Q3 2016
www.jll.co.uk
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