UK PRIME COMMERCIAL PROPERTY RENTAL VALUES GROW 0.6% IN Q3, DESPITE POST-REFERENDUM CONCERNS
- Rental value growth once again led by Central London shops -
- Yields overall remained relatively stable, rising 5bps -
Rental values for UK prime commercial property grew by 0.6% in the third quarter of 2016, despite uncertainty caused by the EU Referendum vote, according to CBRE’s latest Prime Rent and Yield Monitor. In the wake of the Brexit vote, capital values fell by -0.2% across prime UK commercial property, driven by increased yields in the prime Office sector.
The High Street Shop and Industrial sectors saw the largest increases in rental values during Q3 2016, with rents rising 1.5% and 1.1% respectively. Central London high street shops saw rents increased 2.8% over the quarter compared with the 0.9% increase seen across the Rest of UK (excl. South East and Eastern). Just under one third of tracked locations in Central London recorded increased rental values, with the willingness to pay premium rents for limited stock in the most sought-after streets showing no signs of slowing.
Overall, prime yields remained relatively stable during the quarter, increasing by 5bps to 5.5%. This slight uplift of yields was driven by increases in both the High Street Shop and Office sectors. On average Central London prime office yields increased by 17bps, while Rest of UK (excl. South East and Eastern) office yields increased by 4bps.
The EU Referendum result has perpetuated the uncertain political and economic landscape seen before the vote with a continuing impact on property markets in the third quarter of 2016. Although the slowing of prime rental growth was expected given both the ‘Leave’ vote and the position of the rental cycle ahead of the referendum, some key sectors have continued to capitalise on high occupational demand for limited supplies of prime space.