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UK Commercial Property performs well in Q1

Thursday 1st May 2014

The rate of growth in UK commercial property rents continued in Q1, increasing by 1.1% and 3.0% over the last twelve months, according to the CBRE UK Prime Rents and Yields Index. 
The rate at which the average prime yield is falling also accelerated with a fall of 10 basis points over the quarter to stand at 5.9% at the end of Q1 2014. Falling yields and rising rents resulted in a large uplift in capital values across all sectors. Capital values for all property increased by 2.9% over the quarter, with 9.7% capital value growth over the last twelve months.
This is the second consecutive quarter, where none of the yields recorded increases across any of the three main sectors. There have also been significant improvements in the rental market, with a growing number of locations recording either increasing rents or maintaining stable ones.
Once again, The Office sector recorded the strongest results as has been the case for the last seven quarters. All Offices recorded rental value growth of 2.6% over the quarter and 8.5% for the last year. Within the sector, unsurprisingly Central London continues to show the highest rate of growth, increasing by 3.3% over the quarter.
Unlike the office sector, the average rate of rental value growth for Retails continued to be slow in Q1. High street shops recorded rental value growth of 0.1% over the quarter, with Central London and North West the predominant contributors. Prime rents for In-Town shopping centres performed impressively and therefore overall shopping centres reported rental value growth in this sector (0.6%). 
While prime rents remained stable over the past quarter, yields moved down in each retail segment. High street shops recorded average prime yield at 5.5% in Q1, down by 13 basis points. This is the first quarter in the past four years where high street shop yields declined for all regions.
Prime yields for retail warehouses fell by around 25 basis points to 5.6% in Q1, the second quarter of such a strong decline. Although shopping centres recorded the highest rental value growth in the sector, yields remained flat at 5.6% in Q1.
CBRE Research Analyst, Aleksandra Starczynska commented: “The improving economic picture in the UK is being directly reflected in the performance of the commercial real estate. Yields are now falling across the entire country and rental value growth is becoming more and more widespread.”

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Editorial Contact Details - Conor Shilling
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