Prime UK commercial property rents increased 1.9% in Q2 2022

- In Q1 2022 All-Property average prime rents increased 2.2% as yields decreased 10bps.

- Office rents rose 1.6% while yields were stable over the quarter.

- In Retail, High Street Shop rents increased 0.1% while Retail Warehouses increased by 1.0%. Retail Warehouse yields moved in 44bps.

- Industrial yields moved out 2bps while rents rose 2.8%.

CBRE’s latest Prime Rent and Yield Monitor showed a quarter of rental growth across all sectors except for Shopping Centres with average All Property prime rents rising 1.9% in Q2 2022. At the All-Property level, yields moved in 10bps over the quarter.

Industrial prime rents increased 2.8% in Q2 2022. Rental growth was driven by Industrials in East Midlands (3.5%), West Midlands (3.5%) and Eastern (3.3%). Industrials in London and the South East both reported rental growth of 2.5%. Rental values in Scotland remained flat over the quarter which makes it the only region that did not report rental growth. Industrial prime yields moved out 2bps to 4.0%. While Industrial prime yields remain robust, in Q2 2022, yields increased for the first time since Q3 2020. Industrials in London, South East and Eastern reported a yield below the sector average at 3.5%, 3.8%, and 3.9% respectively. Prime yields in the rest of the UK (excl. SE and Eastern) moved in 1bps to 4.6% in Q2 2022.

Office prime rents rose 1.6% in Q2 2022. East Midlands (6.0%) and Fringe London (3.7%) reported the largest increase in rents. In Central London, values rose 2.3% over the quarter. Central London rental growth was predominantly driven by West End Offices which posted an increase of 2.9%. On the investor side, the average yield for the Office sector were flat over Q2 2022. Offices in the North West reported the greatest fall in yields at -16bps to 7.5%.  Yorkshire and Humberside and North East were the only regions where yields moved out by 26bps and 23bps respectively.  

High Street Shop prime rental values decreased by 0.1% in Q2 2022.  Rental values were flat for most regions over the quarter. Prime rents in the South West increased 2.9%, which was the region reporting the strongest rental value growth. West Midlands was the only region that reported a fall in rental values at 0.4%.  Rental values for Shopping Centres were flat over the quarter. Retail Warehouses prime rents rose 1.0% in Q2 2022.  On the investor side, Retail Warehouse yields moved in 44bps in Q2 2022 to 6.6%, the largest inward yield movement out of all sectors. Over the quarter, yields remained stable for High Street Shops. Shopping Centre prime yields moved out marginally by 1bps.

The results of CBRE’s Q2 2022 Prime rents and yields monitor shows robust All-Property rental value growth. Despite the marginal increase in Industrial yields, pricing for the sector remains very strong. Meanwhile, Industrials still drive All-Property rental growth, despite a deceleration in growth compared to Q1 2022. Retail Warehouses continued to be an attractive sector in Q2 2022, reflected both in pricing and rental values. Prime Offices showed solid rental growth over Q2 2022. Occupier demand for high quality office space continues to be strong.

Marlyn Chantre, Research Analyst, CBRE