UK Prime rents and yields remain stable
London, 19 October 2011 – Despite the flow of negative economic news across Europe UK commercial property performance remained stable this quarter, as both prime rents and yields were left unchanged on the previous quarter, according to CBRE.
Highlights from the Q3 report include:
• Prime rents were largely flat in Q3, and are up just 0.1% over the past year.
• The prime high street was the strongest sector this quarter as occupier markets saw improvement with prime rents up 0.9 per cent. This positive move is almost entirely due to the 3.2 per cent growth seen in Central London shops, with nearly all the rest of the regions recording no growth.
• Prime shopping centres were again the weakest sector this quarter, with rents down 0.9 per cent, whilst retail warehouses saw rents fall by 0.1 per cent.
• Prime office market rents stabilised this quarter, up 0.1 per cent, due to weakening demand pressures in Central London.
• Prime industrial rents fell by 0.1per cent this quarter, with most regions seeing no change. The South West and Scotland saw rents fall by 2.3 per cent and 0.5 per cent respectively.
• The CBRE overall property average prime equivalent yield was flat at 6.1 per cent, with all sectors recording minimal movement.
• The property/gilt yield gap increased considerably in Q3 to 366 basis points, due entirely to the sharp decline in gilt yields which moved to 2.4 per cent from 3.5 per cent in Q2.
David Wylie, Head of Economics and Forecasting for CBRE, said: “The lack of movement in either prime rents or yields over the past quarter is symptomatic of the broader uncertainly in the UK economy at present. Prime occupier markets outside of London lack sufficient demand to push rents higher while investor appetite has waned in the face of the growing uncertainty surrounding the economic outlook. Nonetheless, given the growing risk aversion among investors and renewed ‘flight to quality’, the current stability of prime rents and yields is perhaps not wholly unsurprising.”