Commercial Rental growth slows during August

Posted on 9 September, 2014 by Neil Bird

All UK commercial property sectors recorded a weaker performance during August, according to the latest CBRE Monthly Index.

Commercial-Rental-Growth-slows-during-August

Total returns were 1.4 per cent, largely driven by a 0.9 per cent growth in capital values, which have increased by 8.1 per cent to date during 2014. However, August’s figure marks a slowdown in the rise of capital values.

Rental growth also slowed over the course of the month, increasing by just 0.1 per cent overall, despite the continued good performance of the London market.

In the office sector, rental values increased at the fastest rate in the City, where a 1.1 per cent rise was recorded. The Midtown market also performed well with growth of 0.9 per cent.  On the other hand, the index recorded the second month of flat values in the West End.

Outer London and the M25 experienced a 0.2 per cent increase but outside the capital rents remained flat, suggesting that there is still excess capacity absorbing demand.

Retail property displayed a similar performance, with capital values continuing to grow slightly while rents remained flat. But this disguises the continuing geographical split in the sector with London and the South East outperforming the rest of the UK by a notable margin.

Over the past three month period, the South East enjoyed a 3.4 per cent increase in capital values and a 0.6 per cent rise in rental values. In contrast, the regional markets saw capital value growth of just 1.3 per cent, while rents fell by -0.1 per cent over the quarter.

Commenting on the findings, Aleksandra Starczynska, of CBRE Research, said; “Although some rental value growth has been seen in most of the segments for some time now, there is a divergence between regions in terms of the pace of increasing rents.

“It is notable that, particularly for offices and retails, rents in South Eastern England including Central London continued to increase faster than in the rest of the UK.”




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