- The Industrial sector outperformed for the fifth quarter with 2.3% increase in prime rents

- Prime yields moved in slightly across UK commercial property, decreasing -4bps

UK prime commercial property rental values increased by 0.8% in the final quarter of 2017, according to CBRE’s latest Prime Rent and Yield Monitor. At the All Property level, prime yields moved in -4bps over the quarter. Prime rents grew by 3.1% over 2017 as a whole, down from growth of 3.7% in 2016, but still above trend.

Industrials outperformed for the fifth consecutive quarter in Q4 2017, with prime rental values increasing 2.3%, up from Q3’s 1.7% but down from the 3.3% and 2.7% reported in Q1 and Q2 respectively. The Eastern (3.5%), London (3.2%), and South East (2.6%) markets outperformed those in the rest of UK. The Industrial sector also recorded the largest increase in prime rents over the whole of 2017, at 10.4% - the sector’s first double-digit rise since 1990.

Prime rents on High Street Shops increased 0.4% in Q4 2017 and brought annual growth to 2.7% for the sector in 2017. Quarterly growth was driven by increases of 1.2% in Suburban London and West Midlands, followed closely by Eastern Shops with growth of 1.0%. Shops in the South West reported a decrease of -3.5% in prime rents over the quarter.

Office prime rents increased by 0.3% overall in Q4. While increases of 3.0% and 1.3% were reported in the South West and Eastern markets, Central London prime rents decreased -0.1%. Over 2017, prime rents in the Office sector increased 0.7%, although Central London prime rents fell -2.9% over the year.

Prime yields decreased slightly in Q4 2017, moving -4bps on average over the quarter and bringing the total yield movement for 2017 to -18bps. Yields were stable for prime High Street Shops, Shopping Centres, and Retail Warehouses. Overall, the Office sector reported little fluctuation in prime yields, ticking down -2bps, although Offices in the West Midlands and South West reported prime yields falling -18bps and -16bps over the quarter. The Industrial sector reported the biggest yield movement of the quarter with prime yields falling -12bps over the quarter. Industrials in both the East Midlands and West Midlands led the sector with falls of -22bps and -27bps respectively.