Prime UK commercial property rents fall -0.2% in Q2


- Industrials outperformed Offices and Retail with prime rents increasing 1.3%

- Falls in High Street Shop prime rents continued in the second quarter of 2019 with a decrease of -1.1% reported

- Prime yields at the All Property level increased 9bps over the quarter

UK prime commercial property rental values fell -0.2% in Q2 2019, the first decrease at the national level since Q3 2012, according to CBRE’s latest Prime Rent and Yield Monitor. This fall was driven entirely by the Retail subsectors. At the All Property level, prime yields moved out 9bps over the last quarter.

The Industrial sector reached its tenth consecutive quarter of outperformance in Q2 2019, with prime rental values increasing 1.3%. While Industrials in the North West had recorded the largest growth of the regions for the previous four quarters, in Q2 Industrials in the North East took the top spot with prime rents increasing 2.4%. This was followed closely by Eastern (2.3%) and Yorkshire & Humberside (2.0%) prime Industrials. At the national level Industrial prime yields were relatively stable, ticking down ‑2bps. While most regions reported decreases roughly in line with sector average, prime Industrial yields in Scotland decreased -17bps, a slight acceleration from Q1 (-11bps).

At the UK level, High Street Shop prime rents fell -1.1% in the second quarter of 2019. This was a minor acceleration from the -1.0% reported in Q1. Shops in Wales reported the largest decrease, reporting a fall of -7.1%. The next biggest fall was -1.5% in Eastern Shops. Shopping Centre prime rents fell ‐1.2% over the quarter, while Retail Warehouse prime rents decreased -3.1%. Overall, High Street Shop prime yields rose 11bps in Q2. Prime Shopping Centre yields increased 18bps over the quarter. Retail Warehouse prime yields rose 51bps.

Office prime rents rose 0.4% overall in Q2 2019. Overall results were pulled up by Yorkshire & Humberside (3.4%), East Midlands (2.0%), Key Provincial Cities (0.7%), and Central London (0.7%). Overall, prime yields for the Office sector were stable in Q2. However, decreases were reported in Scotland (-11bps) and the East and West Midlands (both -8bps).

Robin Honeyman, Research Analyst at CBRE UK
Our Q2 results are very much a continuation of the trends seen in Q1 2019 with downward pressure from the Retail sectors now pushing All Property rental growth into negative territory. A decline of -0.2% in Q2 is the largest fall in ten years, highlighting the extent to which prime Retail is coming under pressure, both in pricing and rental values
Robin Honeyman, Research Analyst at CBRE UK