Prime UK commercial property rents increase 0.1% in Q1 2019

- Industrials outperformed Offices and Retail with prime rents increasing 1.0%

- Falls in High Street Shop prime rents accelerated to -1.0% in the first quarter of 2019

- Prime yields at the All Property level increased slightly, ticking up 6bps

UK prime commercial property rental values increased 0.1% in Q1 2019, matching Q4 2018 as the slowest growth since Q3 2012, according to CBRE’s latest Prime Rent and Yield Monitor. At the All Property level, prime yields moved out 6bps over the quarter. Overall results in both prime rents and yields were driven by the continued outperformance of the Industrial sector.

Q1 2019 marked the ninth consecutive quarter of Industrial outperformance, with prime rental values increasing 1.0%. This is the sector’s lowest quarterly growth in prime rents since Q4 2015 as the stellar increase of 8.3% p.a. over the previous three years slows to more trend levels. Industrials in the North West reported the biggest increase in prime rents over the quarter (4.3%). Industrial prime yields were stable overall in Q1 2019. At the regional level, Scotland reported a -15bps decrease in prime yields while the Yorkshire & Humberside and North East markets reported increases of 29bps and 25bps respectively.

At the national level, High Street Shop prime rents fell -1.0% in the first quarter of 2019. This was an acceleration of the falls reported in Q3 (-0.4%) and Q4 (-0.4%) of 2018. Shopping Centre prime rents fell ‑1.3% over the quarter, while Retail Warehouse prime rents decreased -1.0%. Overall, High Street Shop prime yields rose 12bps in Q1. Prime Shopping Centre yields increased 12bps over the quarter. Retail Warehouse prime yields rose 25bps.

Office prime rents increased 0.6% overall in Q1 2019. Sector results were pulled up by the Central London (1.0%), Eastern (1.1%), Yorkshire & Humberside (1.2%), and North West (2.1%) markets. No UK region reported a decrease in prime Office rents in Q1. Prime yields for the Office sector were relatively stable overall in Q1 (+1bp).

Robin Honeyman, Research Analyst at CBRE UK
Falls in the Retail sector pulled down the All Property results in Q1 2019, despite the relative strength of Office and Industrial performance. Our Prime Rent & Yield data continues to show prime Retail coming under pressure, both in pricing and rental values.
Robin Honeyman, Research Analyst at CBRE UK