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UK commercial property rents edge higher

There was a marginal rise in the amount of private rents paid by commercial property tenants last month, fresh data reveals.

The latest CBRE Monthly Index show that commercial property rents rose across the UK by an average of 0.2% in June, matching the trend for the year to date despite uncertainty in the build up to the EU referendum.

Capital values rose by 0.1% over the month, a drop on 0.2% in May. But the 0.6% total returns for the month matched returns seen almost every month of the year to date.


In first half of the year, rental value growth hit 1.1%, trailing the 1.7% seen in the corresponding period last year. Capital values rose by 0.6% for H1 2016, some way shy of the 4.1% in H1 2015. Total returns were also lower, from 6.7% in H1 2015, to 3.0% in H1 2016, owed in part to the fact that stamp duty land tax rose in March.

The retail sector experienced rental growth of 0.1% in June, above trend for the year so far, but capital values, which had been flat in April and May, fell by -0.2%. Total returns in the sector were 0.3%, compared with 0.5% the previous month.

The industrial sector experienced a strong monthly performance, with rents increasing by 0.4%, equal to its best monthly performance in 2016.

The office sector saw rents grow by 0.3% in June, an improvement on the 0.2% of both April and May, and in line with trend so far this year, while capital value growth slowed slightly from 0.4% to 0.3%. London offices mirrored this overall trend; rental values rose by 0.3% (faster than the 0.2% seen in May), and capital value growth slowed from 0.6% in May to 0.5% in June, producing total returns in June of 0.8%.

The London office market saw some outliers. Rental values in West End & Midtown offices were flat, down from 0.1% growth in May, while capital value growth also cooled to 0.2% from 0.5% in May. Offices in the City of London also experienced muted growth in the month, with rental growth of 0.2% and capital value growth of 0.1%, down from 0.6% and 0.3% respectively in May.

Miles Gibson, head of research at CBRE UK, said: “Overall, rents and capital values continued to grow in June, with the industrial sector in particular showing strong growth in a month of significant uncertainty. Clearly, capital value growth has slowed, but occupier demand has remained high across the country, pushing up All Property rental growth as fast as any other month this year.

“These figures reflect CBRE valuations carried out in the days immediately following the referendum vote, but July’s monthly index will give a much clearer indication of how monthly-valued assets have been affected by the uncertain environment for commercial property in the aftermath of the Brexit decision. In the meantime, CBRE’s 30 June valuations incorporated a formal Valuation Uncertainty clause.”

CBRE UK Monthly Index Snapshot: June 2016

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