UK commercial property saw less severe decreases in capital values and better total returns across the sectors in April compared with March, although rental value trends weakened, according to CBRE’s monthly index.
Retail
The retail sector recorded a 3.6% decline in capital values, compared with a fall of 5.1% in March, with shopping centres reporting the largest drop at 5.7%.
Shopping centres also pulled down the retail sector’s average rental value growth of 0.6%, with rental values declining by 1.1%.
High street shops in the South East, meanwhile, saw the smallest decline in capital values at 2.2%, recorded rental value growth of -0.6% and provided total returns of -1.7%.
Total returns for the sector were -3.0% and overall retail yields rose by 17bp, having increased by 22bp in March.
Office
The office sector stayed resilient during the month, CBRE said, recording a decline of 1.1% in capital values, measured against a fall of 1.6% for March. Rental values remained flat at 0.0%, while total returns for the office sector were -0.7%. Office yields rose 5bp over the month compared with 8bp in March.
Values fell the least in the London West End and Midtown office submarkets, recording only a 1% fall in capital values.
Outer London and the M25 were the weakest performers, with capital values falling by 1.7%, leading to total returns of -1.3%.
Industrial
Industrial was the strongest-performing sector in April, with capital values dropping by just 0.9%. Rental values were unchanged at 0.0% and total returns were -0.5%. Industrial yields increased by 3bp, from 9bp in March.
South East-located industrial space outperformed the rest of the UK, with capital values decreasing by 0.8% and total returns of -0.4%.
All sectors
Overall capital values fell by 2.1% across UK commercial property in April, CBRE reported. This was driven by a 9bp rise in yields and a 0.2% decrease in rental values. Total returns were -1.6%.
Toby Radcliffe, research analyst at CBRE, said: “CBRE’s April monthly index may allay some fears about the severity of the impact on valuations of the Covid-19 lockdown.
“Rather than seeing values plummet, April has shown an easing in the rate of decline. Offices and industrials have remained resilient. However, we should be wary of placing too much weight on a single month’s results, particularly with investment and leasing activity currently on hold.”
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