UK prime commercial property rental values increased by 0.7% on average in Q3 2017 according to CBRE’s latest Prime Rent and Yield Monitor. At the All Property level, prime yields fell by -3bps over the quarter. Movements in both prime rents and yields were boosted by the performance of the Industrial sector.
In Q3 2017, and for the fourth consecutive quarter, the Industrial sector recorded the largest increase in prime rental values of the main sectors. Prime rents in the sector increased 1.7% on average over the quarter, down from the 3.3% and 2.7% growth reported in Q1 and Q2 2017. Industrials in the North East and Yorkshire & Humberside markets outperformed the rest of the sector with growth of 9.2% and 9.0% in prime rents respectively. Industrial prime rents rose 2.0% in London over Q3, while the South East reported growth of 1.5%.
Prime rents in the Office sector increased by 0.9% in Q3. The distinct regional divergence in performance evident in previous quarters continued in Q3, with Central London prime rents decreasing -0.2% compared with growth of 1.8% in the South East and 0.3% in the Rest of UK (excl. SE & Eastern). Central London performance was pulled down by the -0.7% decrease reported in the West End. However, the overall decline in prime rent has slowed from Q1 and Q2.
Prime yields decreased slightly in Q3 2017, moving -3bps on average across UK commercial property. At the sector level Offices and Shops reported little fluctuation in yields. Prime yields shifted -2bps in UK Shops and -3bps in Offices. Within the Office sector, Central London prime yields moved just -2bps while outside the capital, falls of -17bps were reported in North East. Yields in the prime Industrial sector moved in by -8bps across the UK, with Industrials in the South West reporting yield movement of -29bps. Industrials in the South East, London, and Eastern markets all reported prime yields falling -5bps.
Miles Gibson, Head of UK Research at CBRE, said: “Q3 results show a continuation of the trends reported so far in 2017, notably the outperformance of the Industrial sector and Central London’s changing rental story. At a higher level, our Q3 results continue to demonstrate the resilience of the prime commercial property sector, although growth does look to be slowing slightly.”