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Q2 reports weakest UK commercial property market performance of the year

Open-access content Wednesday 15th July 2020
Authors
Herpreet Kaur Grewal
web_office_iStock-186743265.png

Capital values fell by -0.7 per cent across all UK commercial property in June 2020, according to the latest CBRE Monthly Index. 

The drop took capital value growth to -3.8 per cent over Q2 and -6.9 per cent in the first half of 2020. 

In June, rental values decreased -0.3 per cent, making the quarterly fall -1.0 per cent. June total returns were -0.2 per cent bringing Q2 returns to -2.4 per cent.

The retail sector reported a -1.4 per cent decline in capital values in June. 

Shopping centres continued to pull down the sector average, posting a fall of -2.4 per cent over the month. 

Over Q2 2020, retail capital values fell -6.6 per cent taking the decrease in the first half of the year to -12.9 per cent. 

This is the largest 1st half fall in the sector since H1 2009. Rental values declined -0.8 per cent over the month and total returns were -0.8 per cent. Total returns over Q2 were -4.9 per cent.

The office sector posted capital value growth of -0.2 per cent over the month. 

Capital values fell -1.9 per cent over the quarter and -3.1 per cent in the first six months of 2020. 

Over Q2 2020, West End and midtown offices was the most resilient subsector with a decrease of -1.7 per cent. 

Average rental values for the sector fell -0.1 per cent in June, the first negative growth of the year. 

Q2 reported a fall in office rental values of -0.2 per cent. 

Total returns were 0.2 per cent for the month, edging into positive territory for the first time since February.

Toby Radcliffe, research analyst, CBRE, said: "CBRE’s June Monthly Index has confirmed that overall Q2 2020 saw a larger decline in rental and capital values than Q1. This was the case for all sectors except retail where capital values fell slightly more during the first quarter. This is perhaps not surprising considering the length of time spent under strict lockdown conditions.

"However, there is reason to hope that Q2 represents the trough in Covid-19 related value decreases. June has seen a continuation of the easing in capital and rental value declines, and as more non-essential businesses re-open their doors throughout July further gains in Q3 seem possible."

Image credit | iStock
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