By Richard Williams

Prime rents up 0.8% across UK CRE

Prime commercial property rents increased by 0.8% on average in the first quarter of 2017, boosted by the strong performance of the industrial sector, according to CBRE.

The agency’s latest Prime Rent and Yield Monitor also found prime yields fell slightly over the quarter.

In Q1 2017, and, the industrial sector recorded the largest increase in prime rental values of the main sectors for the second consecutive quarter. Prime rents grew 3.3% across the sector, with the South East and Eastern markets outperforming all other locations, increasing 6.0% and 10.9% respectively.

Alongside this, prime rents in the office sector fell by 0.4% but there is a distinct regional divergence. Within central London, prime office rental values were down 1.4%, thanks to falls of 2.2% in West End, 2.3% in Midtown, and 0.7% in City.

Conversely, the rest of UK (excluding the South East and East) saw office prime rents grew 1.4% over the quarter, helped along by strong performances in the South West, North East, and Yorkshire & Humberside.

Prime yields fell by 4bps across UK commercial property over Q1 2017, with prime office yields falling 9bps.

Central London yields decreased 13bps, pushed down by falling City and Southbank yields. Elsewhere, decreases of 25bps and 12bps in North East and Wales contributed to prime yields decreasing 2bps across the rest of UK.

Yields for prime shopping centres and retail warehouses were relatively stable for the quarter. Prime high street shops and industrials also saw little yield fluctuation, ticking down 2bps and 1bp respectively.

Miles Gibson, head of UK research at CBRE, said: “Following an uncertain 2016 and with the potential for further change in the political and economic landscape in 2017, Q1 2017’s results continue to demonstrate the resilience of the prime commercial property sector. The quarter’s positive growth in prime rental values provides an optimistic outlook for the year. However 2017 will not be without its challenges, particularly if weaker economic growth feeds through to slower tenant demand.”