Capital values across all UK commercial property rose by 0.7% in March 2017, the biggest increase since December 2015, according to the latest CBRE Monthly Index. Rental values also experienced their largest increase since December 2015, climbing by 0.3% over the month. In Q1 2017 capital values increased 1.3% on average, while rental values rose 0.5%. Industrial property played the dominant role in pulling up these averages.

Retail capital values across the UK grew by 0.2% in March. This was driven by the performance of high street shops, particularly in the South East where capital values increased 0.4%. Rental values remained stable on average for the Retail sector. In Q1 2017, capital values rose by 0.5% in the Retail sector, a slight increase from the 0.4% recorded in Q4 2016. Rental values increased by 0.1% over the quarter.

The UK Office sector recorded capital value growth of 0.4% over the last month, up slightly from February’s 0.3%. Rental values increased by 0.1% across the sector, Outer London/M25 offices reporting a rise of 0.3%, and Central London and Rest of UK offices increasing slightly by 0.1%. UK office capital values grew by 1.0% in Q1 2017, up from Q4 2016’s 0.9% and Q1 2016’s 0.8%.

The Industrial sector again recorded strong performance on key measures in March. At the national level, capital values increased by 2.0% over the month, the highest monthly growth since December 2009 and significantly above all other main sectors. Rental values also increased significantly more than other main sectors, rising 0.9% in March. These results were driven largely by Industrials in the South East where capital values and rental values rose by 2.5% and 1.3% respectively. Across the UK, Industrial capital values increased by 3.8% in Q1, while rental values rose 1.7% over the quarter. The regional divergence in Industrial sector performance was also present in quarterly results. South East Industrials reported capital value growth of 3.8%, compared with 1.8% across the rest of UK.

Miles Gibson, Head of UK Research at CBRE
March’s Monthly Index shows commercial property’s steady start to 2017 apparently accelerating, with not a single minus sign in either our monthly or Q1 results. Industrials in particular continue to shine and provide a boost to overall results at an all-property level. Although our very strong finding for South East industrials deserves the usual caveat about reading too much into one month’s figures, acute shortages of supply provide a credible basis for an underlying growth story.
Miles Gibson, Head of UK Research at CBRE