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Retail and industrial drives continued capital and rental growth in February

News

Shifali Gorka

12 March 2025

Retail

UK commercial real estate’s capital values increased by 0.2% in February.

Rental values also increased by 0.2% month-on-month, while total returns for commercial property rose by 0.6%, according to CBRE UK monthly index.

Retail remained the top-performing sector for the second consecutive month, delivering a total return of 0.8% last month.

Capital values grew by 0.2%, with standard shops and retail warehouses rising by 0.3%, while shopping centres saw a smaller increase of 0.1%.

Rental values for the retail sector grew by 0.2%, with standard shops outperforming at 0.3%, compared with 0.2% for retail warehouses, while shopping centres remained flat.

Offices achieved total returns of 0.4% in February, with income return offsetting a 0.1% decline in capital values.

Capital values rose modestly for outer London/M25 offices and rest of UK offices, but dropped by 0.4% for central London offices. However, central London office rental values increased by 0.2%, outperforming the 0.1% growth seen in other office segments.

Overall, office rental values rose by 0.1% during the month.

The industrial sector posted total returns of 0.7% in February, driven by a 0.3% increase in both capital and rental values. South East industrials saw capital values rise by 0.3%, while the rest of UK industrials grew by 0.2%. Rental values increased by 0.3% across both segments.

Jennet Siebrits, CBRE’s head of UK research, said: “February saw relatively steady growth for the retail and industrial sectors, consolidating the upturn in capital values seen at the end of last year.

“Yet the office market saw a slight reversal in fortunes. This is perhaps not surprising as the sector continues to find its feet after a prolonged period of price adjustment.”

She added: “Nonetheless, investor sentiment has improved, and the real estate investment market is much more active than 12 months ago. While more transactions could trigger further price discovery in some segments, this is also a sign of a market in recovery mode in which investors are searching for high-quality assets to refresh and reposition their real estate portfolios.”

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UK commercial real estate’s capital values increased by 0.2% in February. Rental values also increased by 0.2% month-on-month, while total returns for commercial property rose by 0.6%, according to CBRE UK monthly index. Retail remained the top-performing sector for the second consecutive month, delivering a total return of 0.8% last month. Capital values grew by 0.2%, with standard shops and retail warehouses rising by 0.3%, while shopping centres saw a smaller increase of 0.1%. Rental values for the retail sector grew by 0.2%, with standard shops outperforming at 0.3%, compared with 0.2% for retail warehouses, while shopping centres remained flat. Offices achieved total returns of 0.4% in February, with income return offsetting a 0.1% decline in capital values. Capital values rose modestly for outer London/M25 offices and rest of UK offices, but dropped by 0.4% for central London offices. However, central London office rental values increased by 0.2%, outperforming the 0.1% growth seen in other office segments. Overall, office rental values rose by 0.1% during the month. The industrial sector posted total returns of 0.7% in February, driven by a 0.3% increase in both capital and rental values. South East industrials saw capital values rise by 0.3%, while the rest of UK industrials grew by 0.2%. Rental values increased by 0.3% across both segments. Jennet Siebrits, CBRE’s head of UK research, said: “February saw relatively steady growth for the retail and industrial sectors, consolidating the upturn in capital values seen at the end of last year. “Yet the office market saw a slight reversal in fortunes. This is perhaps not surprising as the sector continues to find its feet after a prolonged period of price adjustment.” She added: “Nonetheless, investor sentiment has improved, and the real estate investment market is much more active than 12 months ago. While more transactions could trigger further price discovery in some segments, this is also a sign of a market in recovery mode in which investors are searching for high-quality assets to refresh and reposition their real estate portfolios.”