UK commercial property showed significant improvement in June, with total returns of 0.7% at the ‘All Property’ level, delivering1.9% over the second quarter of the year, according to CBRE’s latest UK Monthly Index. Capital values continued to grow, increasing by 0.2% in June and 0.3% over the last three months.
‘All Offices’ recorded a total return of 1.0% and capital value growth of 0.5% in June. Central London offices performed well again with total returns of 1.1% driven by an increase in capital values of 0.7% over the month. Offices in the West End and Midtown were the best performing segments within the sector. June total returns were 1.4% and 1.1%, with capital value growth of 1.0% and 0.6% respectively for West End and Midtown offices. Capital values in Outer London/M25 offices continued to rise, increasing by 0.6%, with total return of 1.3% over the month. Rest of UK Offices continued to underperform although the rate of decline in capital values (-0.4% in June) is slowing.
This month, ‘All Retails’ saw capital values drop by 0.1%. Total return growth slowed from 0.6% in May to 0.4% in June. Over the second quarter, ‘All Retail’ total returns were 1.6% and capital values recorded a small uplift of 0.1%. At the segment level, ‘High Street Shops’ and ‘Retail Warehouses’ remained stable. However, after three months of strong performance, ‘Shopping Centres’ recorded a capital value decline of 0.7% and was the worst performing segment monitored in June.
‘All Industrials’ performed well this month. After a long period of falling or flat capital values, they recorded a positive capital value growth of 0.5% and total returns of 1.1% in June delivering a 2.3% return in the second quarter.
Rental values remained flat again this month at the ‘All Property’ level. City Offices recorded the highest rental value growth of 0.6% in June. Rest of UK Offices rents declined by 0.2%.
Aleksandra Starczynska, Analyst, CBRE Research, said:
“At the ‘All Property’ level throughout 2013 we have seen a steady improvement in both capital value growth and total returns. At the turn of the year, capital values were still falling, but we have now recorded three consecutive months of growth. It remains the case that Central London offices are outperforming the rest of the market, but other sectors and segments have shown continued improvement during the year.”
