According to CBRE’s latest Prime Rent and Yield Monitor, prime commercial property rental values rose 0.1% in Q1 2019 in the UK, recorded slowest growth since Q3 2012.
Prime rents in the UK office sector increased 0.6% in Q1 2019, up from the 0.3% rise reported in Q4 2018. Overall results were pulled up by the Central London (1.0%), Eastern (1.1%), Yorkshire & Humberside (1.2%), and North West (2.1%) markets. No UK region reported a decrease in prime Office rents in Q1. Prime yields for the Office sector were relatively stable overall in Q1 (+1bp). While there were decreases reported in the City (-2bps), Docklands (-3bps), and South East (-2bps), the North East and Yorkshire & Humberside reported increases of 25bps and 37bps respectively.
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Industrial prime rents increased 1.0% in Q1 2019. While still the best performance of all the sectors, this is the lowest quarterly growth in prime rents for Industrials since Q4 2015. For the fourth consecutive quarter, prime Industrials in the North West reported the largest increase of the regions with growth of 4.3%. London and the South East also performed strongly (1.1% and 1.3% respectively). Prime yields for the Industrial sector were flat overall in Q1. Sector level results masked a divergence in regional performances. Scotland reported a -15bps decrease in prime yields over the quarter, with East Midlands, West Midlands, Wales, and North West regions also reporting decreases. Contrasting these results, the Yorkshire & Humberside and North East markets reported increases of 29bps and 25bps respectively.
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At the national level, all shops prime rents decreased -1.0% in the first quarter of 2019. This was an acceleration of the -0.4% falls reported in Q3 and Q4 of 2018. Shops in the East of England reported the biggest fall in Q1 (-2.9%), followed closely by the South East (-2.6%). Shopping Centre prime rents fell -1.3% over the quarter, while Retail Warehouse prime rents decreased -1.0%. Overall, All Shops prime yields increased 12bps in Q1 2019. The biggest increase in prime yields was reported in the North East where Shop prime yields rose 52bps. Prime Shopping Centre yields increased 12bps over the quarter. Retail Warehouse prime yields rose 25bps.
Overall results in both prime rents and yields were driven by the continued outperformance of the Industrial sector.
”Falls in the Retail sector pulled down the All Property results in Q1 2019, despite the relative strength of Office and Industrial performance. Our Prime Rent & Yield data continues to show prime Retail coming under pressure, both in pricing and rental values.” said Robin Honeyman, Research Analyst at CBRE UK.