Capital values across the UK’s commercial property sectors dropped by 0.4% in September alongside flat rental values and returns, according to CBRE’s monthly index.
During the third quarter, capital values decreased by 0.9% – the fourth successive negative quarter and the weakest of 2019 so far.
Rental values increased by 0.1% over the quarter, up slightly from the 0.1% decline recorded in Q2.
Total returns of 0.5% for Q3 brought returns for the year to date to 1.9%.
Retail
In Q3, capital values in the retail sector decreased by 3.6% (-2.2% in Q2), with shopping centres reporting a 4.6% drop. Rental values fell by 1.2% for the sector over the same period (Q2 2019: -0.8%).
Retail capital values fell by 1.7% in September, weighed down by shopping centres (-2.6%) and retail warehouses (-1.8%). Rental values decreased by 0.6% over the month.
Offices
The offices sector recorded capital value growth of 0.4% and total returns of 0.8% in September, outperforming industrial for the third month this year. Central London offices outperformed the sector average with an increase of 0.6%.
The rest of UK offices pulled down the sector average, increasing by 0.1% overall. Rental values rose by 0.4% over the month, pulled up by growth of 0.6% in central London. Office capital values increased by 0.6% in Q3, while office rental values rose 1.1%.
Industrial
Capital values increased by 0.3% in September across the industrial sector, pushing total returns to 0.7%. Industrial assets in the South East saw capital value growth of 0.4% over the month, compared with growth of 0.1% in the rest of UK.
Rental values in the sector increased by 0.3% over the month. Industrial capital values rose by 0.7% in Q3 (Q2 2019: 0.6%) while rental values increased by 0.8% (Q2: 0.7%). Total returns for the quarter were 1.9% (Q2: 1.8%).
Robin Honeyman, senior research analyst at CBRE UK, said: “All property returns in the third quarter were again dampened by continued poor performance in the retail sector, where returns were down on the previous two quarters and on the same period last year. However, performance in the office and industrial sectors remains steady.
“Our index shows total returns of 1.9% for the year so far, compared to the IPF’s August Consensus Forecast of 0.9% for 2019 as a whole.”
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