Capital values across UK commercial property increased 0.6% in September 2017, according to the latest CBRE Monthly Index. The national average was again boosted by the strong performance in the Industrial sector. Rental values increased by 0.1% over the month.

In the third quarter of 2017 UK commercial property values increased 1.4% overall, the strongest quarterly performance of 2017 (Q1 2017: 1.3%, Q2 2017: 1.2%) thanks to another quarter-end surge from the Industrial sector. Rental values increased by 0.4% over the quarter, up from the 0.3% recorded in Q2. Total returns of 2.7% in Q3 bring returns at the All Property level to 8.2% for 2017 so far.

Retail capital values increased 0.3% in September, with growth of 0.5% for high street shops over the month. Rental values decreased slightly in the sector, down -0.1%, with both Retail Warehouses and Shopping Centres reporting rental value falls in line with the sector average. In Q3 2017 capital values in the Retail sector increased 0.8%, with high street shops in the Rest of UK reporting an increase of 1.1%. Rental values increased by 0.1% for the sector over the same period.

The Office sector recorded stable capital values in September. Capital values fell by -0.2% in the City while they increased by 1.1% and 0.7% in the Outer London/M25 and Rest of UK markets respectively. Rental values fell by -0.1% overall with the sector average pulled down by Central London’s -0.4%. Rental values in Outer London/M25 and Rest of UK offices increased 0.5% and 0.2% respectively in September. Capital values in the Office sector as a whole increased 1.0% in Q3, while rental values were flat. Central London rental values fell -0.5% in Q3.

Capital values increased 1.4% in September across the Industrial sector, driven by 1.7% growth in the South East. Industrials in the Rest of UK reported capital value growth of 1.0% over the month. Rental values increased 0.6% in the sector, growth of 0.8% in South East Industrials. Industrial capital values increased 3.1% in Q3 2017, while rental values increased 1.4%.

Miles Gibson, Head of UK Research at CBRE
The Industrial sector continues to be the belle of the ball in 2017, with short supply and high demand resulting in strong performance. Despite the falling rental values reported in Central London offices, overall results continue to show steady performance in the UK property market. Our index shows total returns of 8.2% for the year so far, already ahead of the IPF’s August consensus forecast of 6.7% for 2017 as a whole.
Miles Gibson, Head of UK Research at CBRE