August sees slight value declines at All Property level

Capital values fell -0.3% across all UK Commercial property in August 2020, according to the latest CBRE Monthly Index. Over the month, rental values decreased -0.2%. Total returns remain positive at 0.2% at the all property level, due to income return of 0.5%.

The Retail sector reported a -0.8% decline in capital values in August. This was pulled down considerably by Shopping Centres where capital values decreased -1.9%. Meanwhile, all other Retail subsectors reported declines smaller than the sector average. Retail rental values declined -0.7% over the month and total returns were -0.2% however this negative figure was entirely down to Shopping Centres, which was the only retail subsector to report negative returns at -1.3%.

The Office sector posted a decrease in capital values of only -0.1% over the month. Rental values also fell -0.1% in August. Central London offices were in line with sector average. At 0.2% Outer London/M25 offices stood out as the only Office subsector to post an increase in capital values, the first instance of increasing values in the Office sector since February. Sector average total returns were 0.3%.

In August the Industrial sector continued to be the only sector to report positive capital value growth. However, at 0.1%, this is a smaller increase than in the previous month (0.3%). Sector average rental values increased 0.1%, with Industrials Rest of UK performing slightly better at 0.2%. Industrial total returns were 0.5% in August.

At the all property level not much changed in August, rental and capital values are still experiencing small declines with returns remaining marginally positive. However, when we look more closely there are some interesting stories. With a deceleration in the rate of value decline, the Office sector could be back on the path towards positive growth, not far behind the Industrial sector. Meanwhile, declining values continue within the Shopping Centre subsector, making a positive end to Q3 seem unlikely for Retail.
Toby Radcliffe, Research Analyst, CBRE