UK commercial property capital and rental valuation sees growth in 2018

The UK saw modest rises in commercial property valuation growth, with total returns up by 0.6% in February while capital value growth and rental value growth were up by 0.2% apiece. The London office space saw total returns in line with country wide totals, while industrials pushed up the average with a 1.2% climb, and retail property saw modest growth of 0.4%. 

The UK property sector continues to be in a period of acute, but increasingly stable, uncertainty – in light of Brexit negotiations. The impact of which, remains as yet, uncertain – although risks, such as the warning from the Bank of England regarding employment in the capital, remain on the horizon.

However, recent analysis of leases in the commercial property sector in London showed a slight decrease in activity, including a 9% drop in 2017 from the previous year to a total around 12.6 million square feet of space under construction – the segment continues to see strong performances for planned refurbishments against new builds. The professional services sector is one of the key clients in the segment’s demand for new space. 

The latest figures for changes in commercial property valuations, supplied by CBRE a segment specific consultancy firm, paints a relatively robust picture – even in the late grip of winter. Across the UK, commercial property capital values increased by 0.2% over February, while rental values were also up by 0.2% in the same period – total returns were meanwhile up by 0.6%.

The office segment was relatively resilient, with central London office total returns at par with the national average of 0.6%, while capital value growth was slightly higher at 0.3%, and rental values were slightly lower at 0.1%.

However, the industrial segment was the strongest performer, with total returns at 1.2%, while capital value growth came in at a more modest 0.8% increase for the period – the South East saw increases of 1%, bolstering the rest of the UK growth of 0.4%. Rental values saw an increase of 0.4% for February in the segment.

The retail sector has been impacted by considerable uncertainties, including hard hits to mid-market food and wider impacts of spending power from consumers. Overall rental capital values decreased by -0.1% in February, partly from stronger falls in the UK excluding London of -0.2% for high street shops and -0.8% for shopping centres. Rental values, meanwhile, saw small declines.

The typical steady start to the year for UK commercial property continued into February with capital values increasing 0.2% on average over the month, according to the latest CBRE Monthly Index. Rental value growth was 0.2% at the All Property level in February.

Commenting on the recent figures, Miles Gibson, Head of UK Research at CBRE, said, “UK commercial property continued its traditionally steady start to the year in February. Results for 2018 so far look solid with the Industrial sector lifting overall performance figures.”