Commercial property at the All Property level saw an increase in capital value of 0.1 per cent in October 2018, according to CBRE’s latest United Kingdom Monthly Index report for the last month.
The rental value growth for commercial property remained flat for the third consecutive month in the year to date and the All Property total returns for the year to date reached 6.3 per cent in October.
However, retail capital values and rental values fell in October 2018 according to CBRE. The retail rental values fell by 0.2 per cent whereas the capital values fell by 0.6 per cent, which was further impacted by a dip in the capital value of shopping centres which was recorded at 0.2 per cent.
Industrial commercial property, on the other hand, is going from strength to strength as the capital value for this sub-sector increased by 0.7 per cent in October. The overall capital growth for the sector came to double digits (10.2 per cent) in 2018 to date. The sector also saw an increase in rental values for October of 0.2 per cent.
The office sector also saw growth in capital values according to CBRE, as they increased by 0.4 per cent in October which was driven by 0.8 per cent further growth in other UK markets. The rental value for office commercial property grew by 0.2 per cent across this sector in October this year.
Robin Honeyman, research analyst at CBRE UK commented on the data: “With the notable exception of shopping centres, income returns have helped keep retail sector total returns positive in 2018 so far.
“However, double-digit returns for the year-to-date in the industrial sector continue to boost All Property results and conceal the divergent fortunes of the two sectors.”
Retail commercial property – is it all that bad?
The retail sector saw a decline in the sector’s capital values of 0.6 per cent during October and capital values in the rest of the UK high street also fell by 0.7 per cent, with vales in the South East remaining flat. Overall, the retail sector also saw a fall in rental values of 0.2 per cent in October, according to CBRE.
The retail sector’s October results were affected by the decrease in shopping centres capital value of 1.2 per cent and the value has fallen in total 6.8 per cent bringing the total returns for this sub-sector for the year to date to 1.0 per cent. Retail warehouse capital value also saw a decrease of 0.6 per cent in the last month.
RICS Q3 2018 UK Commercial Property Market Survey results suggests that the reason behind the industrial sector’s growth in capital and rental values is linked to the consumer shift towards online shopping, as high street retailers and warehouses continue to struggle on.
However, according to RICS, the demand for commercial industrial space has continued to increase at a moderate pace, resulting in the industry seeing an extended period of uninterrupted growth since 2012. RICS reported that demand for businesses taking up retail space has continued to slow for a sixth quarter, while demand for office space remained steady.