Industrials report impressive growth while Offices and Retail continue to be challenged

Capital values fell -0.1% across all UK Commercial property in October 2020, according to the latest CBRE Monthly Index. Over the month, rental values decreased -0.3%. Total returns were 0.3% due to income return of 0.5%.

In October the Retail sector recorded a -1.0% fall in capital values. Both High Street Shops in the Rest of the UK and Shopping Centers performed worse than the sector average, with decreases of -1.3% and -2.2% respectively. Retail rental values declined -0.7% over the month, within this Retail Warehouses posted the smallest fall at -0.5%. Retail total returns were -0.4% for the month. Returns had been trending positive over the previous two months for High Street shops, they have now returned to negative territory.

The Office sector posted capital value growth of -0.2% over the month. Central London Offices saw values decrease by -0.6%, the subsector’s largest fall since May. Meanwhile Offices in the rest of the UK saw values fall only -0.1%. Average Office rental values fell -0.2% in October, City Offices pulled down the average at -0.5%. Office total returns were 0.1% for the month.

In October the Industrial sector reported a 1.4% rise in capital values, the greatest monthly increase in values for the sector since June 2018. The October figure was pulled up by the South East where values rose 1.7%, compared with 0.9% in the rest of the UK. October was also a strong month for Industrial sector rental growth with values rising 0.3%. Total returns for the month were 1.8%, again, the highest since June 2018.

October revealed weaker performance for the Office and Retail sectors than in the previous month. This comes even before the announcement of a new national lockdown had time to affect most valuations. However, there is some good news to come out of October. Industrials performed impressively over the month recording capital growth greater than that seen by the sector over the whole of the previous quarter. With the fundamentals remaining strong, there is no reason to believe Industrial value growth will not continue for the rest of the year despite new lockdown measures.
Toby Radcliffe, Research Analyst, CBRE