Capital values for commercial real estate declined slightly by 0.3% in June, according to the latest figures from CBRE.
The agent’s latest UK Monthly Index found that rental values rose by 0.2%, but a small outward movement in yields caused capital values to fall.
CBRE said the fall in capital values in June cancelled out the effects of a rise seen in April, such that capital value growth over the second quarter of 2023 was 0.
However, total returns for commercial real estate were positive both for June, at 0.2%, and for Q2 overall, which stood at 1.4%.
Office capital values fall
Capital values in the office sector fell by 1.2% in June. Central London offices declined by 0.8%, while offices in both the outer London/M25 and rest of UK markets fell by 2% and 1.7% respectively.
CBRE said outward yield movements were the main driver for these changes, as office rental values rose by 0.2% in June.
While rental values were unchanged for outer London/M25 offices, the equivalent for Central London offices increased by 0.2%, while offices in the rest of the UK were up by 0.3%.
Total returns for the office sector were -0.8% for June and -1.1% for Q2 2023.
Retail rental values inch up
Retail capital values were static in June, while rental values rose by 0.2%. Retail park locations experienced no movement in capital values and a marginal 0.1% increase in rental values.
Capital values at shopping centres fell by 0.3% and rental values by 0.4% in June.
Standard store capital values were unchanged month-on-month, while rental values rose by 0.3%. However, the performance of standard shops varied by region, with shops outside of London seeing a fall in capital values in June.
Overall, total returns for the retail sector stood at 0.5% in June and 2.3% for Q2 this year.
Industrial capital values grow
Industrial capital values increased by 0.2% in June, with a smaller rise of 0.1% among locations in the South East compared with 0.3% for the rest of the UK.
Rental values rose by 0.4%, with a smaller rise for the South East (0.3%) versus the rest of the UK (0.8%). Total returns for the industrial sector were 0.6% in June, and 2.5% for Q2 2023.
CBRE head of UK research Jennet Siebrits said: “The results for June give us a complete picture for the first half of the year and indicate that so far 2023 has been a mixed experience for investors in commercial real estate.
“Returns have improved compared to the end of last year, and we continue to see rental growth, although yields have moved out as the year has progressed.
“However, the performance of different property types has started to diverge, with the industrial sector performing the best during Q2 2023.”
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