A strong month for Retail takes all property capital growth to 1.0%

Capital values increased 1.0% across all UK Commercial property in July 2021, according to the latest CBRE Monthly Index. This is the greatest monthly growth rate in All Property capital values since December 2014. In July, rental values rose 0.2% and total returns were 1.4%.

In July, Retail sector capital values rose 1.1%. This was driven by growth in all Retail subsectors apart from Shopping Centres, which posted capital growth of -0.3%. Compared to recent months this is a small decline for the subsector. The strong month for Retail capital values was boosted by a 2.1% capital growth for Retail Warehouses, a record monthly increase for the subsector. This strong Retail Warehouse performance was reflected around the country and not just in one region. In July, Retail rental values decreased by -0.2%. Retail total returns were 1.7% - the strongest since June 2014.

The Office sector saw capital value growth of 0.2% over July. This reflected positive capital value growth outside Central London while Central London values were flat with 0% growth. Offices in the Rest of the UK stood out, increasing 0.3%, compared to -0.2% in June. However, this was driven by a limited number of strongly performing assets which pushed up the subsector average. Rental value growth for all Offices was 0.2%. Rental values for Central London Offices and Offices in the Rest of the UK both increased in line with the sector average. Office total returns were 0.5%.

In July, Industrial sector capital value growth was 2.0%, slightly down from the 2.3% in June. Industrials in the Rest of UK saw stronger capital value growth than those in the South East, with increases of 2.4% and 1.7% respectively, illustrating the strength of interest in the sector across the country. All Industrial rental value growth was 0.5% for the second consecutive month. Industrials in the South East reported rental values rising in line with sector average, while the increase was slightly less in the Rest of the UK at 0.4%. Industrial total returns for the month were 2.3%.

The recent rebound in values has continued at an accelerated pace in July. Positively, the growth in values seems to be relatively robust with increasing capital values across Retail, Offices and Industrials. This represents the first month to post rising values in all three sectors since October 2017. July’s strong All-property performance was further boosted by a record-breaking performance from Retail Warehouses, which is fast becoming the sector to watch.
Toby Radcliffe, Research Analyst, CBRE