Rents for prime Central London shops soared by 9.0% in the final quarter of 2015, the fastest growth for the sector since 1988, according to the latest CBRE Prime Rents and Yields Monitor. Rents for high street shops in Central London rose by 18.0% for the whole of 2015, highlighting the growing demand for units in London’s most sought-after luxury retail destinations. Nearly a third of retail locations in Central London monitored by CBRE saw rental increases in the last three months of the year (‘Q4’).
In the rest of the UK, CBRE found that prime retail rents grew by a more modest 0.8% in Q4, and estimated capital values by 1.4%, together having little impact on yields which remain around 6.0%. Over the year, prime rents and estimated capital values for shops outside Central London increased by 1.0% and 3.2% respectively.
During the busiest season of the year for UK retailers, footfall declined by 3.9%1 and retail sales grew at 0.1%2 compared to December 2014. This has been attributed to the weather and to changing consumer attitudes towards online shopping. Online retail sales grew by 15.1%3 during the period.
Phil Cann, Head of UK Retail, CBRE, said:
“The Christmas period has been a mixed bag for retailers, with retail sales rising slightly on December last year, despite a marked retreat in footfall from UK high streets. Nevertheless, Central London continues to boast some of the most sought-after retail spaces in the world, a fact brought to light by the quite remarkable jump in rents toward the end of 2015.”
“Luxury retailers are chasing very limited available stock, sending rents soaring as they pay to place themselves at the heart of London’s luxury marketplace.”
While UK shop rents grew fastest in the final quarter, CBRE found that office and industrial sectors also experienced significant growth in rents. The office market experienced rent rises of 1.7% in the quarter (6.5% in 2015), driven by high growth in the M25 North and M25 South zones of 7.4% and 7.3% respectively. Rents in the industrial sector grew by 0.8% in Q4 (6.8% for the year), with North West and Scotland recording the highest uplift.
Overall, UK commercial property rents grew by 1.3% in Q4 and 5.0% over the year. Yields remained stable across most locations in Q4, resulting in quarterly and annual yield shift of -1 and -24 basis points respectively.
