Of the 1022 locations monitored, 16% showed an increase in rental value. Prime yields fell by an average of 8 basis points over the quarter and the UK All Property average currently stands at 5.6%, with 35% of locations recording falling yields.
In 2014 total prime rental value growth was 3.8%, up from 2.8% in 2013, with the rate increasing steadily over the last 12 months. The average prime yield recorded a fall of 41 basis points over 2014 (compared to 32 bps in 2013) and the combination of continued falls in yields and strengthening rental value growth resulted in capital value growth of 11.8% for 2014.
Michael Haddock, Senior Director, CBRE commented:
“During 2014 we have seen prime rental growth strengthening across many UK markets. Prime yields also recorded a substantial improvement, reflecting the growth in investment activity over the last year. At a national level, total transaction volume reached £61.7 billion in 2014 compared to £54.5 billion in 2013 and just beating the total reached in 2006.
“Within the office sector, Central London experienced the strongest rental value growth, at 11.4% in 2014 compared with 8.1% for the UK as a whole. However, yields are showing the reverse of this pattern, with the strongest falls in office yields being recorded in the rest of the UK.”
Over 2014, the South East and Eastern regions stood out because of the lack of rental value growth. Yield shift is spreading to the rest of the country meaning that capital value growth has been fairly evenly distributed across the country. In contrast the industrial sector is seeing an even pattern of both rental value growth and yield shift across the country, although the West Midlands, which is experiencing a shortage of good quality industrial space, appears to be leading the way.
Yields in the shopping centre and retail warehouse sectors stabilised in Q4 2014 after sharp declines in the first three quarters. Although, prime yields were flat in these two sectors in the last quarter, they have recorded the highest average fall for the year as a whole, with the average prime yield down by 53 and 63 basis points respectively compared to the all sector average of 41 basis points.
Andrew Marston, Director, CBRE said:
“Capital value growth in the Office sector has been seen across the whole of the UK. Central London recorded growth of 7.2% for the quarter and 15.6% for the year as a whole. However, the gap between London and the rest of the UK is narrowing, with capital value growth of 10.6% for the UK (excluding London, South East and Eastern). In just Q4 2014 East Midlands and Yorkshire and Humberside recorded the highest capital value growth in the office sector.
“All Industrials also performed very well, recording capital value growth in all regions. This was the result of both increasing rents and falling yields, which contributed to the capital value growth of 12.1% for 2014.”