All property capital growth returns to positive territory driven by strong Industrial performance

Capital values increased 0.2% across all UK Commercial property in February 2021, according to the latest CBRE Monthly Index. Over the month, rental values were unchanged at 0.0%. Total returns were 0.7%.

The Retail sector reported a -0.6% fall in capital values over February. This was in line with the decline in January 2021 but was a smaller fall than in any month of 2020. Retail Warehouses performed better than the sector average with capital growth of 0.0%. February was the first month that the subsector did not record a fall in values since February 2018. Retail rental values declined -0.5% over the month, for High Street shops in the South East the fall was only -0.1%. Retail total returns were 0.0% in February.

Office sector capital values were flat over the course of the month. City Offices performed better than sector average, posting growth of 0.1%. Conversely, Outer London and M25 Offices was the weakest performing Office sub-sector with values decreasing -0.9%. Office rental values rose by 0.1% in February, driven by Central London Offices where values also increased 0.1%. Office total returns were 0.4% for the month.

Industrials returned to stronger capital growth in February following a slight dip in the pace of growth in January. Over the month, Industrial capital values increased 1.3%. For the second consecutive month Industrials in the rest of the UK outperformed the sector average, reporting a 1.7% rise in values, compared with 1.1% in the South East. Over February, Industrial sector rental values increased 0.5%, growth was slightly less in the rest of the UK at 0.4%. Industrial total returns for the month were 1.7%.

In February property values returned to positive growth after the small decline we saw in January. This was the result of both strong Industrial performance and a smaller decline for Retail than we have become accustomed to in recent months. With Retail Warehouses reporting no fall in capital values in February it is possible that values for some Retail subsectors are now beginning to bottom out. Whether this levelling off in Retail value decline materialises will be something to watch in the next few months as lockdown restrictions ease.
Toby Radcliffe, Research Analyst, CBRE