- Industrials record largest sector increase with 2.7% growth

- Q2 Shopping Centre prime yields rise 15bps

UK prime commercial property rental values increased by 0.7% 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 over the quarter. Movement in both prime rents and yields were 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% over Q2 2017, down slightly on the 3.3% growth recorded in Q1. Industrials in the London (3.6%), South East (3.8%), and Eastern (6.6%) markets outperformed all other locations. Prime rents in Rest of UK Industrials increased 0.1% over the quarter.

In Q2 2017 prime rents in the Office sector fell -0.2%, but with a distinct regional divergence. Central London prime rents decreased for the third consecutive quarter, falling -1.3% in Q2 thanks to decreases of -1.5% and -1.8% recorded in West End and City Offices respectively. Elsewhere, M25 North Office rents rose 3.2% and Rest of UK Office prime rents increased by 1.0%, pushed up by strong performances in Yorkshire & Humberside (2.1%), Eastern (1.6%), and West Midlands (1.7%).

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 decreased -35bps while yields in the Rest of UK decreased -23bps.

Miles Gibson, Head of UK Research at CBRE, said: “At the All Property level, and helped along by the Industrial sector, Q2 2017 results demonstrate 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.”