Capital values increased 0.1% across UK commercial property in April 2018, according to the latest CBRE Monthly Index. Rental values were flat over the month.
The Industrial sector again provided a boost to overall results in April 2018. Capital values increased 0.7% over the month, with both the South East and Rest of UK markets performing roughly in line with the sector average. The Industrial sector also outperformed in terms of rental value growth with an increase of 0.2%.
Office capital values increased 0.2% over the last month. Capital values in Central London Offices were flat in April, outpaced by growth in both the Outer London/M25 (0.1%) and Rest of UK (0.4%) markets. Rental values were flat across all submarkets.
The Retail sector recorded capital values decreasing -0.3% in April, with the sector average pulled down by a fall of -0.8% in Shopping Centres. With the exception of South East Shops where capital values were flat, all Retail subsectors reported falls in capital values. Rental values fell -0.1% across the Retail sector, again pulled down by Shopping Centres (-0.4%).
Miles Gibson, Head of Research at CBRE UK, said: “At the All Property level, April reported the lowest monthly capital growth since October 2016. Although this is only one month’s result, it could be an indication that investors will need to get used to income driven returns for the time being.”
Prime UK commercial property rents increase 0.6% in Q1 2018
UK prime commercial property rental values increased 0.6% in the first quarter of 2018, according to CBRE’s latest Prime Rent and Yield Monitor. At the All Property level, prime yields came in -5bps over the quarter. Overall results in both prime rents and yields were driven by the continued outperformance of the Industrial sector.
Q1 2018 was the sixth consecutive quarter of Industrial outperformance, with prime rental values increasing 2.3% over the quarter. This was down on Q1 2017’s 3.3% increase. As with previous quarters, Industrials in the London (3.8%), South East (2.9%), and Eastern (3.5%) markets outperformed the other submarkets in the UK. Prime rental growth of 2.8% in Scotland also helped pull up the sector average in Q1.
High Street Shop prime rents decreased -0.3% in Q1 2018. A fall in prime rents of -4.9% in the South West marked the second consecutive fall in prime rental values for the market. The sector average was also pulled down by falls of -0.7% in Scotland and -1.2% in the South East. These offset increases of 1.0% in the West Midlands and 4.4% in the East Midlands in Q1 2018.
Office prime rents increased 0.4% overall in Q1, up from 0.3% in Q4 2017. Central London Office prime rents decreased -0.2% over the quarter. Outside Central London no markets reported a decrease in prime rents over the quarter. Rest of UK (excl. SE and Eastern) prime rents increased 0.4%, while South East and Eastern rents increased 1.2% and 2.3% respectively. Suburban London Offices also reported a 2.4% increase in prime rents in Q1 2018.
Prime yields decreased slightly in Q1 2018, moving in -5bps on average over the quarter. Both High Street Shops and Shopping Centres reported stable yields for the quarter, with Retail Warehouses recording a minimal uptick of 3bps. Overall the Office sector reported little movement in prime yields in Q1, ticking down -3bps. Offices in the London Fringe reported prime yields falling -29bps and Offices in Scotland reported a decrease of -15bps. Industrial sector prime yields fell ‑16bps overall in Q1, driven by the West Midlands (-35bps), South East (-24bps), and Yorkshire & Humberside (‑23bps).
Miles Gibson, Head of UK Research at CBRE, said: “Results from 2017 demonstrated the resilience of prime commercial property. Overall data in Q1 2018 would suggest this will continue in 2018, although performance continues to be boosted by the Industrial sector. How long this continues to be the case remains to be seen.”