Survey assumptions
The PAI/PMA Property Survey, first carried out in December 1981, now covers some 80 centres throughout the UK excluding London.(*) The current survey is based on information collected as at December 1986 and makes a comparison with December 1985 and December 1984 data. Rental growth has been calculated after taking into account centre size by “weighting” the centres according to their stock of commercial and industrial floorspace. Because such figures are not available for Scotland, the figures for rental growth are restricted to England and Wales.
Rental growth
The retail market has continued to show strong rental growth over the period December 1985 to December 1986 and in this respect has maintained its lead over the office and industrial markets. The retail market achieved an absolute average weighted growth rate of 21.1%, representing a real growth rate of 16.8%, which is significantly higher than that achieved in the previous year to December 1985 (when the figures were 10.7% in absolute terms and 5% in real terms). However, this figure may be misleading, as it is heavily weighted by the exceptional performance of just three centres — Liverpool (suburbs), Manchester (suburbs) and York. Recalculating to exclude these results, the retail market has achieved on overall average an absolute growth rate of 16.8% (12.6% in real terms), a figure well above that of either the industrial and office sectors and still representing considerable improvement on last year’s figure.
The industrial market has continued to show a poor performance relative to the retail and office markets over the year to December 1986. The absolute rate of rental growth has again declined, from 4.5% to 3.5%. However, in real terms, rental levels have stabilised, improving on the 1.7% decline experienced during the year ending December 1985. This in part reflects the lower rate of inflation during 1985-86.
Offices have experienced both absolute and real rental growth during the period December 1985-86. In absolute terms, rental levels grew at just over 7%, an improvement on the 4.4% growth experienced in the previous year and representing real growth of 3.2% in contrast to the 1.4% decline of the earlier period.
An analysis of rental performance by comparing the percentage of centres experiencing rental decline, those experiencing no change in rental levels and those with rental growth is illustrated in the table below. This reinforces the earlier results, which showed that the retail market performed best over the year to December 1986; it has the greatest proportion of centres experiencing rental growth, and only 1% experiencing rental decline. In comparison with the same analysis for the year to December 1985, a substantially higher proportion of centres experienced rising rents in the retail and office markets, which has been accompanied by a corresponding decrease in the number of centres experiencing no change or falling rental levels. The pattern in the industrial market over the period December 1985-86 has remained broadly similar to that of the previous year, with a marginal increase in the proportion of centres experiencing rental growth and a corresponding decrease in the proportion experiencing falling rental levels.
(*) The PAI/PMA Property Survey is based on information collected regularly by the 39 member firms of Property Agents International and analysed by an independent consultancy, Property Market Analysis. Further details of this survey can be obtained from PAI at Vernon House, Sicilian Avenue, Holborn, London WC1A 2QH, or from PMA at 9 Broad Court, Long Acre, Covent Garden, London WC2B 5QN.
