The rebound in values continues with All-Property capital growth reaching 1.1% over August

Capital values increased 1.1% across all UK Commercial property in August 2021, according to the latest CBRE Monthly Index. This represents the greatest increase in capital values year to date. In August, rental values rose 0.2% and total returns were 1.6%.

In August, Retail sector capital values rose 1.1% for the second consecutive month. This was the result of 0.5% growth for High Street Shops and another record-breaking month of capital growth for Retail Warehouses at 2.2%. Meanwhile, Shopping Centre values continued to fall, decreasing 0.4%. Retail rental values fell -0.1% over the month, with no subsector reporting positive growth. High street Shops in the rest of the UK posted the sharpest decrease at -0.4%. Retail total returns were 1.7%.

The Office sector saw capital value growth of 0.3% over August. Central London offices posted capital growth of 0.1% driven entirely by 0.7% growth for City Offices. The City’s strong performance over August was driven by a limited number of strongly performing assets which pushed up the subsector average. Offices in the Rest of the UK posted 0.6% growth. In contrast, Outer London and M25 Offices saw values fall -0.2%. Office rental values increased 0.2% over the month while total returns were 0.7%.

In August, the Industrial sector continued its strong performance with 2.3% capital value growth. August was the third month of 2021 to post capital growth in excess of 2.0% for the sector. Industrials in the South East saw stronger capital growth than those in the Rest of the UK, with increases of 2.5% and 1.9% respectively. All Industrial rental value growth was 0.5% for the third consecutive month. Both Industrials in the South East and the rest of the UK reported rental values rising in line with the sector average. Industrial total returns for the month were 2.6%.

Capital values have continued to increase across the board in August indicating growing investor optimism following the removal of Covid related restrictions. This has been especially pronounced in the Retail sector where values have increased at the fastest rate in seven years, the highlight being another record-breaking performance from Retail Warehouses. Assuming there is continued capital growth in excess of 1.0% at the All-Property level in the coming month, Q3 2021 is on track to be the strongest quarter since Q4 2014.
Toby Radcliffe, Research Analyst, CBRE