CBRE’s UK Q2 2013 survey of prime rents and yields shows evidence of improving fortunes for the UK’s regional office markets. Overall, UK commercial property rents grew by 0.7% over the second quarter, continuing the strong rental growth seen in the first quarter of the year. The average prime yield fell over the quarter, again continuing the trend seen first in Q1 2013.
Rental growth and falling yields have been a feature of the market in London and the South East for some time now, but Q2 2013 has been the first to see this recovery extend to a range of other UK regions. In the retail sector the divide between London and the South East and the rest of the UK is still evident, however, industrial property rental values remained flat across the country, but there was a slight downward movement in yields.
The prime office market was the strongest sector overall and nationally recorded rental value growth of 1.7% over the quarter. Offices across all UK regions performed well, with none recording a drop in rents. The highest rate of rental growth over the last twelve months remains that of Central London at 5% (and 1.7% for the last quarter), but it was notable that a number of the regions outside London and the South East have started to record rental growth for prime offices, whereas until recently the general trend has been down.
In contrast to the office sector, retail prime rental value growth continued to show the same polarized pattern that has been evident in previous quarters, with rental growth in London and the South East, but a generally negative trend elsewhere. Whilst at the national level, high street retail generated rental growth of 0.7% for the quarter, for shops in the rest of the UK (excluding London, South East and Eastern) rents declined -0.6% for the quarter.
Yield movements were, on average, small, however offices and industrial showed further falls in both Central London markets and in the rest of the UK. Prime retail yields were generally flat across the country, with slight downward movement in Central London, but up across the rest of the UK.
Aleksandra Starczynska, Analyst, CBRE Research, said: “These results show that a more widespread recovery in the UK property market is starting to become apparent. After a long period during which rental growth and falling yields have been confined almost entirely to London and the South East, Q2 has seen more positive performance in the rest of the UK. This more positive trend in the UK real estate sector is in line with what is also being reported in the economy generally, through business surveys and other data.”