CBRE Monthly Index shows continued capital value declines for UK commercial property in August

Capital values for commercial real estate decreased by 0.2 per cent in August 2023, according to the latest CBRE UK Monthly Index. Rental values increased by 0.3 per cent, and total returns were 0.2 per cent. 

Retail capital values declined by 0.6 per cent throughout August, and rental values remained flat. All retail segments recorded relatively similar capital value declines throughout the month. Shopping Centres posted the largest decline (-0.8 per cent), followed by Standard Shops and Retail Warehouses (-0.6 per cent and -0.5 per cent respectively). Shopping Centre rental values declined by 0.7 per cent, while Retail Warehouse rents increase 0.2 per cent and Standard Shop rental values remained flat. Overall, total returns for the Retail sector were 0.0 per cent for the month of August. 

Office capital values fell by 0.6 per cent in August. Central London capital values fell by 0.4 per cent, while both Outer London/M25 and Rest of UK offices saw capital values decrease by 0.8 per cent. Office rental values increased by 0.2 per cent, driven by Central London rental values rising 0.7 per cent over the month. Rental values for Rest of UK offices increased 0.1 per cent, while Outer London/M25 rents fell 0.2 per cent. Total returns for the Office sector were -0.2 per cent in August. 

Capital values for the Industrial sector increased by 0.3 per cent in August, and rental value growth for the sector was 0.6 per cent. Industrials in the South East posted capital value growth of 0.4 per cent and rental value growth of 0.7 per cent, while Industrials in the Rest of UK saw capital values increase by 0.1 per cent and rental values rise by 0.4 per cent. Total returns for the Industrial sector were 0.6 per cent in July. 

Jennet Siebrits, Head of UK Research, CBRE

August represents the third consecutive month of capital value declines for UK commercial property as repricing is still evident in the market, albeit the declines are only small. Furthermore, rental growth is still evident across the board.

The industrial sector continues to be the strongest performing sector so far this year and is the only sector to experience capital value growth. However, the August results present some positive news for the office sector, with capital value declines slowing throughout the month.

Jennet Siebrits, Head of UK Research, CBRE