27 July 2017 | Herpreet Kaur Grewal
UK prime commercial property rental values increased by 0.7 per cent on average over the second quarter of 2017, according to the CBRE's latest Prime Rent and Yield Monitor.
At the national level, prime yields fell by -5bps [basis points] over the quarter. Movement in both prime rents and yields was driven by industrial sector performance.
For the third consecutive quarter, the industrial sector recorded the largest increase in prime rental values of the main sectors.
Prime rents across the sector increased 2.7 per cent over Q2 2017, down slightly on the 3.3 per cent growth recorded in Q1. Industrials in the London (3.6 per cent), South-East (3.8 per cent), and Eastern (6.6 per cent) markets outperformed all other locations. Prime rents in Rest of UK Industrials increased 0.1 per cent over the quarter.
In Q2 2017 prime rents in the office sector fell -0.2 per cent, but with a distinct regional divergence. Central London prime rents fell for the third consecutive quarter, falling -1.3 per cent in Q2, thanks to decreases of -1.5 per cent and -1.8 per cent recorded in West End and City offices respectively.
Elsewhere, M25 North office rents rose by 3.2 per cent and Rest of UK Office prime rents increased by 1.0 per cent, pushed up by strong performances in Yorkshire & Humberside (2.1 per cent), Eastern (1.6 per cent), and West Midlands (1.7 per cent).
Prime yields fell by -5bps across UK commercial property over Q2 2017. At the sector level, Offices and Shops saw little yield fluctuation, with changes of -2bps and +1bp respectively.
Shopping centre prime yields rose 15bps while yields for retail warehouses were stable for the quarter. Yields in prime industrials decreased -25bps, with yields falling in most regions. Prime yields in the South-East fell -35bps while yields in the Rest of UK decreased -23bps.
Miles Gibson, head of UK research at CBRE, said the results demonstrated "the resilience of the prime commercial property sector, although growth appears to have slowed slightly. Despite earlier fears, this quarter's political events, notably the UK general election, have had no noticeable effect on performance of prime UK property".