UK commercial property latest 14th August 2013

UK commercial property values improve for 4th successive month

In July, the performance of the commercial property sector continued to improve, according to the latest CBRE UK Monthly Index. At the 'All Property' level, capital values increased by 0.4% during July, the fourth successive month of positive growth. Total returns were 0.9% for July and 4.1% for the year to date. At a sector level, 'All Offices' recorded capital value growth of 0.8% and a total return of 1.3% in July.

Central London outperformed again, with a total return of 1.6% driven by capital value growth of 1.2% in July. Offices in the West End and Midtown were the best performing segments, recording further capital value growth of 1.5% and 1.2% over the month respectively. While Central London remains the main driver of office sector growth, a notable trend is the continued improvement in other parts of the country. Offices in 'Outer London/M25' recorded a total return of 1.3%, driven partly by growing capital values (0.6% over the month).

After a large and continuous decline in capital values, 'Rest of UK' offices recorded only a small capital value decline of -0.1% (the smallest monthly decline for the segment since October 2011). In July, 'All Industrials' continued to perform well, with capital value growth of 0.6% and a total return of 1.2% over the month. This continues the improvement in capital value growth that has been seen over the last three months.

'All Retail' capital values remained flat and total return was 0.5% in July. Over the year to date, the sector's capital values have declined by -0.3%. At the segment level, capital values for High Street Shops continued to decrease, falling by -0.1% and they remained flat for 'All Shopping Centres'.

Retail Warehouses recorded a small uplift in capital values, increasing by 0.1%. Across all sectors, rents remained flat in July with yield shift the main driver of improving capital values. The highest rental value growth was for City Offices (0.1%) and for Rest of UK offices (0.1%), which recorded a positive increase in rents for the first time this year. Rents for High Street Shops declined by -0.2%.

Aleksandra Starczynska, Analyst, CBRE Research, said: "The most interesting feature of the CBRE UK Monthly Index results over the last few months has been the way in which capital value growth has been spreading from Central London to other parts of the UK market. Central London offices have been a strong performer for some time, but this summer has seen growth for industrial property and more widely in the office sector."