Across UK commercial property, capital values increased 0.2% in June, according to the latest CBRE UK Monthly Index. This brought Q2 capital value growth to 0.6% and 1.5% for the first half of 2018. Rental values increased 0.1% over the month and have increased 0.2% over the quarter. All property total returns were 4.2% for the first half of 2018.

Retail sector capital values decreased -0.8% in June. Other than the exceptional month of July 2016 (immediately after the EU referendum), this is the biggest monthly fall since May 2012. Overall sector performance in June 2018 was driven by a fall in capital values of -1.3% in Rest of UK High Street Shops and -1.1% in Shopping Centres. Over Q2 as a whole, capital values decreased -1.3% across the sector, pulled down by Shopping Centres (‑2.3%) and Rest of UK Shops (-1.9%). Retail rental values decreased -0.5% over the quarter.

In contrast, capital values in the Industrial sector increased 1.7% in June. Capital growth in South East Industrials continued to outperform the Rest of UK, at 2.0% and 1.2%. Rental values increased 0.5% across the sector in June. The Industrial sector reported an increase in capital values of 3.7% over Q2. Industrial rental values increased 1.1% in Q2.

Office capital values increased 0.3% over the last month, up from May’s 0.2%. While Central London Offices reported an increase of 0.2% in June, capital values in the Outer London/M25 and Rest of UK markets rose 0.6% and 0.4% respectively. Rental values increased 0.2% across the Office sector. Outer London/M25 Offices outperformed other markets with rental value growth of 0.5% over the month. Capital values in the Office sector increased 0.6% in Q2 2018 while rental values increased 0.4%.

Miles Gibson, Head of UK Research at CBRE
June’s results throw a spotlight on the contrasting fortunes of two market sectors. The Industrial sector continues to enjoy strong occupier and investor demand. Meanwhile, the recent run of CVAs is having a noticeable, but perhaps not surprising, impact on half-year Retail valuations. But overall, at the half way point of 2018, Q2’s steady results bring total returns to 4.2% for the year to date.
Miles Gibson, Head of UK Research at CBRE