Prime UK commercial property rents rise by 0.3% in Q4 and 0.8% in 2019

The UK average prime yield remains unchanged

UK prime commercial property rental values continued to increase in Q4 2019 according to CBRE’s latest Prime Rent and Yield Monitor. The average rental value growth was 0.3% for the quarter. Positive rises in Q3 and Q4 contributed to the overall growth in prime rental values of 0.8% in 2019 as a whole. At the All Property level, prime yield increased by 2bps over the last quarter and 24bps over 2019. The average prime yield currently stands at 5.6%.

The Industrial sector was the strongest sector in the final quarter of 2019 and outperformed all other sectors for the thirteenth consecutive quarter. In Q4 2019, prime rental value growth for Industrials was 1.5%. Industrials in London showed promising signs with accelerated growth in prime rents at 2.6% (compared to 2.1% in Q3 2019). In the Rest of UK (excluding Eastern and South East), prime rents increased by 0.7%, driven by activity in the West Midlands where prime rents increased by 2.7%.Over the last twelve months, Industrials prime rents increased by 5.8% at the national level, with London, West Midlands and North West recording rental growth above the average.

Rents also continued to rise in the Office sector, recording growth of 0.6% for the quarter and 2.6% for the year. Central London offices saw average growth of just below 0.5%. In contrast, offices in the Rest of UK (excluding Eastern and South East) performed well and rose by 0.9%.

Prime rents for all Retail sectors continued to fall in Q4 2019, with shopping centres registering the biggest fall (-1.3%). All regions across all Retail sectors recorded either falling or flat rents.

Across all property sectors, Industrials recorded the greatest fall in yields t in Q4 2019. Prime yields fell by -11bps over the quarter, mainly driven by London and South East. Prime yields for the Office sector decreased by -2bps over the quarter with Midtown and Southbank recording a -12bps yield shift. Whilst prime yields for High Street Shops remained unchanged, Shopping Centre and Retail Warehouse yields weakened and increased considerably over the quarter (37bps and 33bps, respectively).

Robust occupational market fundamentals ensured that Industrials ended the year strongly. Most investors decided to hold their assets and continue benefiting from high levels of rental growth and healthy pricing
Pol Marfa Miro, Senior Research Analyst, CBRE