MARKETVIEW

UK commercial property prime

rental values continue to

increase.

UK Prime Rent and Yield, Q2 2015

Q2 2015 CBRE Research © 2015 CBRE Ltd. | 1

164

*Arrows indicate change from previous quarter.

Source: CBRE, Q3 2014.

30 230 6

-180

-120

-60

0

60

120

180

Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015

Risers Fallers

Figure 1: Rental Values: Risers and Fallers

• Prime rental values increased by 1.3% in Q2 2015,

resulting in rental value growth of 2.6% H1 2015.

• The average prime yield was down by an average

of -6 basis points and currently stands at 5.4%, a

fall of -32 basis points over the year to date.

• Capital value growth was 2.6% for the quarter and

6.0% in the first half of the year.

• Across the main sectors, Industrials recorded the

highest growth in terms of rental and capital values.

• Prime rents for the industrial sector increased in

32% of locations monitored, with the highest growth

in London. Prime yields declined in most regions.

• Whilst rental value growth was more evident for

offices in Central London, South East and Eastern,

yield shift was more even across the UK.

• The retail sector shows a divergence between

London and the Rest of UK. Rental values increased

in Central London, but remained unchanged or fell

in the rest of the country.

Source: CBRE, Q2 2015

MARKETVIEW

Q2 2015 CBRE Research © 2015 CBRE Ltd. | 2

UK PRIME RENT AND YIELD

Source: CBRE, Q2 2015

Source: CBRE, Q2 2015

Source: CBRE, Q2 2014

Figure 3: Nominal Prime Rental Growth (%)

Q/Q Y/Y

Shops 1.4 2.4

Shopping Centres 0.2 0.6

Retail Warehouses 0.1 -0.4

Offices 1.6 8.3

Industrials 2.6 7.1

All Property 1.3 4.7

Figure 4: Prime Yields (%)

Q4 2014

Q1 2015

Q/Q bps

Y/Y bps

Shops 5.2 5.2 -7 -23

Shopping Centres 4.8 4.8 0 -43

Retail Warehouses 5.2 5.2 0 -13

Offices 5.4 5.3 -10 -34

Industrials 6.2 6.1 -8 -32

All Property 5.5 5.4 -6 -32

Figure 5: Capital Value Growth (%)

Q/Q Y/Y

Shops 3.0 7.4

Shopping Centres 0.3 9.9

Retail Warehouses 0.2 2.2

Offices 3.6 15.4

Industrials 4.0 13.0

All Property 2.6 11.1

MARKETVIEW

PRIME RENTS

OFFICES

RETAIL

INDUSTRIALS

Q2 2015 CBRE Research © 2015 CBRE Ltd. | 3

UK PRIME RENT AND YIELD

-25

-20

-15

-10

-5

0

5

10

Q2 2

009

Q4 2

009

Q2 2

010

Q4 2

010

Q2 2

011

Q4 2

011

Q2 2

012

Q4 2

012

Q2 2

013

Q4 2

013

Q2 2

014

Q4 2

014

Q2 2

015

Shops Retail Warehouses

Offices Industrial

Shopping Centres

Source: CBRE, Q2 2015

Figure 6: Annual Prime Rental Growth by Sector (%pa)

-25

-20

-15

-10

-5

0

5

10

15

20

Q2 2

009

Q4 2

009

Q2 2

010

Q4 2

010

Q2 2

011

Q4 2

011

Q2 2

012

Q4 2

012

Q2 2

013

Q4 2

013

Q2 2

014

Q4 2

014

Q2 2

015

Central London South East

Eastern Rest of UK (escl. SE and Eastern)

Figure 8: Regional Prime High Street Rental Growth (%pa)

-40

-30

-20

-10

0

10

20

30

Q2 2

009

Q4 2

009

Q2 2

010

Q4 2

010

Q2 2

011

Q4 2

011

Q2 2

012

Q4 2

012

Q2 2

013

Q4 2

013

Q2 2

014

Q4 2

014

Q2 2

015

West End City Midtown Docklands

Figure 7: Central London Prime Office Submarket Rental Growth (%pa)

Source: CBRE, Q2 2015

Source: CBRE, Q2 2015

MARKETVIEW

PRIME YIELDS

OFFICES

RETAIL

INDUSTRIALS

Q2 2015 CBRE Research © 2015 CBRE Ltd. | 4

UK PRIME RENT AND YIELD

Figure 9: UK All Sector Average Prime Yields (%)

Figure 11: Industrial Market Yields (%)

4

5

6

7

8

9

10

Q2 2

009

Q4 2

009

Q2 2

010

Q4 2

010

Q2 2

011

Q4 2

011

Q2 2

012

Q4 2

012

Q2 2

013

Q4 2

013

Q2 2

014

Q4 2

014

Q2 2

015

West End City South East West Midlands

Figure 10: Prime Office Market Yields (%)

4

5

6

7

8

9

10

Q2 2

009

Q4 2

009

Q2 2

010

Q4 2

010

Q2 2

011

Q4 2

011

Q2 2

012

Q4 2

012

Q2 2

013

Q4 2

013

Q2 2

014

Q4 2

014

Q2 2

015

Shops Shopping Centres

Retail Warehouses Offices

Industrial

4

5

6

7

8

9

10

Q2 2

009

Q4 2

009

Q2 2

010

Q4 2

010

Q2 2

011

Q4 2

011

Q2 2

012

Q4 2

012

Q2 2

013

Q4 2

013

Q2 2

014

Q4 2

014

Q2 2

015

London South East West Midlands

Source: CBRE, Q2 2015

Source: CBRE, Q2 2015

Source: CBRE, Q2 2015

MARKETVIEW

PRIME CAPITAL VALUES

OFFICES

RETAIL

INDUSTRIALS

Q2 2015 CBRE Research © 2015 CBRE Ltd. | 5

UK PRIME RENT AND YIELD

-40

-30

-20

-10

0

10

20

30

40

Q2 2

009

Q4 2

009

Q2 2

010

Q4 2

010

Q2 2

011

Q4 2

011

Q2 2

012

Q4 2

012

Q2 2

013

Q4 2

013

Q2 2

014

Q4 2

014

Q2 2

015

Shops Retail Warehouses

Offices Industrial

Shopping Centres

Figure 12: Annual prime Capital Value Growth by Sector (%pa)

-40

-30

-20

-10

0

10

20

30

40

Q2 2

009

Q4 2

009

Q2 2

010

Q4 2

010

Q2 2

011

Q4 2

011

Q2 2

012

Q4 2

012

Q2 2

013

Q4 2

013

Q2 2

014

Q4 2

014

Q2 2

015

Central London

South East

Rest of UK (excl. SE & E)

Figure 14: Regional Prime High Street Capital Value Growth (%pa)

-50

-40

-30

-20

-10

0

10

20

30

40

Q2 2

009

Q4 2

009

Q2 2

010

Q4 2

010

Q2 2

011

Q4 2

011

Q2 2

012

Q4 2

012

Q2 2

013

Q4 2

013

Q2 2

014

Q4 2

014

Q2 2

015

Central London

Rest of UK (excl. SE and Eastern)

Key Provincial City

Figure 13: Prime Office Submarket Capital Value Growth (%pa)

Source: CBRE, Q2 2015

Source: CBRE, Q2 2015

Source: CBRE, Q2 2015

MARKETVIEW

Q2 2015 CBRE Research © 2015 CBRE Ltd. | 6

UK PRIME RENT AND YIELD

Rental Growth (%) Actual Yields (%) Yield Shift (bps) Capital Value Growth (%)

Q/Q Y/Y Last 5 Years (% pa) Q2 2015 Q/Q Y/Y Q/Q Y/Y

All Property 1.34 4.65 2.09 5.41 -6 -32 2.60 11.12

All Shops 1.40 2.39 0.85 5.17 -7 -23 2.98 7.37

Central London 5.48 11.74 9.23 2.96 -9 -42 9.08 28.08

Suburban London 0.46 0.50 0.15 5.29 0 -11 0.46 2.82

South East -1.05 -0.92 -1.60 5.75 -5 4 -0.07 -1.33

Eastern -0.20 -1.83 -1.75 6.16 -6 5 0.74 -2.54

South West -1.44 -4.52 -4.86 6.01 0 -5 -1.44 -3.80

East Midlands 0.00 -3.62 -1.72 6.55 0 16 0.00 -5.86

West Midlands 0.65 -0.37 -2.80 6.53 0 6 0.65 -1.23

Wales -0.83 -3.82 -6.91 7.39 0 0 -0.83 -3.82

North West -0.78 -1.35 -1.57 6.40 -15 -27 1.56 3.00

Yorkshire & Humberside 0.86 1.22 0.56 6.38 -9 -19 2.29 4.30

North East 0.00 0.00 -0.42 6.61 -12 -17 1.78 2.61

Scotland -0.20 0.04 -0.60 6.02 -5 -13 0.70 2.24

Rest of UK (excl. London, SE and Eastern) -0.20 -1.40 -2.10 6.39 -5 -8 0.67 -0.01

All Shopping Centres 0.17 0.55 0.71 4.84 0 -43 0.29 9.86

In Town 0.15 1.10 0.62 4.85 -3 -45 0.75 10.78

Out of Town 0.21 -0.93 1.39 4.76 6 -38 -0.87 7.55

London, SE and Eastern 0.27 1.72 1.72 4.62 8 -27 -1.06 8.11

Rest of UK (excl. London, SE and Eastern) 0.12 -1.53 0.54 4.92 -2 -53 0.52 9.48

All Retail Warehouses 0.14 -0.43 -0.64 5.22 0 -13 0.19 2.15

Bulky 0.13 0.47 -0.39 5.61 0 -24 0.13 4.77

Fashion 0.50 -1.62 -0.87 5.09 -1 -10 0.82 0.41

Open A1 -0.05 -1.02 -0.88 5.09 0 -13 -0.05 1.57

London, SE and Eastern 0.65 -0.64 -1.08 5.08 -2 -15 1.01 2.43

Rest of UK (excl. London SE and Eastern) -0.03 -0.99 -0.52 5.36 0 -14 -0.03 1.73

All Offices 1.56 8.33 5.00 5.29 -10 -34 3.59 15.44

West End 0.00 7.67 7.19 4.19 -6 -26 1.52 14.63

City 4.56 17.01 6.75 4.17 -20 -44 9.50 29.24

Mid Town 1.56 11.08 7.24 4.98 -4 -35 2.30 17.47

Docklands 5.05 11.11 2.86 4.83 -11 -22 7.43 16.24

Southbank 2.31 15.00 7.73 4.73 -16 -45 5.89 26.08

M25 North 3.16 4.83 2.37 7.04 -15 -33 5.31 9.88

M25 South 2.48 7.57 3.12 6.39 -5 -24 3.27 11.85

Thames Valley 1.80 5.85 5.08 5.91 -9 -29 3.48 11.27

Key Provincial Cities 0.39 4.98 1.65 5.63 -9 -36 2.18 12.10

Out of Town 0.34 3.24 1.74 6.59 -14 -45 2.45 10.59

Central London 2.15 11.88 7.05 4.26 -12 -34 5.03 20.86

Suburban London 1.85 5.83 5.14 5.94 -8 -36 3.26 12.58

South East 2.46 5.99 2.55 6.47 -6 -19 3.48 9.17

Eastern 2.79 5.04 3.05 6.72 -18 -41 5.53 11.58

South West 0.29 1.62 0.22 6.77 -12 -44 2.16 8.49

East Midlands 0.00 2.08 1.11 6.82 0 -43 0.00 8.60

West Midlands 0.00 1.43 1.01 6.72 -18 -50 2.78 9.08

Wales 1.20 8.51 0.16 7.53 0 -19 1.20 11.23

North West 0.24 4.30 1.20 7.45 -4 -33 0.86 9.20

Yorkshire & Humberside 0.42 10.34 2.01 7.38 -35 -71 5.41 21.50

North East 0.00 0.33 1.33 8.57 15 0 -1.20 1.02

Scotland 0.00 3.02 0.26 7.06 6 -18 -0.85 5.86

Rest of UK (excl. London SE and Eastern) 0.22 3.80 0.93 7.13 -10 -40 1.72 9.92

All Industrial 2.63 7.15 1.78 6.09 -8 -32 3.99 13.04

London 5.54 11.72 2.74 5.07 -4 -18 6.34 15.73

South East 3.01 8.63 1.81 6.01 -8 -23 4.36 12.96

Eastern 2.14 5.68 1.32 6.17 -16 -46 4.81 13.65

South West 0.37 4.48 0.41 6.92 -2 -49 0.72 12.08

East Midlands 2.18 3.95 1.78 6.41 0 -44 2.18 11.14

West Midlands 0.00 9.03 3.71 6.15 0 -47 0.00 17.37

Wales 0.00 2.36 -1.24 7.91 -5 -20 0.69 5.04

North West 1.31 1.31 0.65 6.83 -10 -29 2.79 5.77

Yorkshire & Humberside 0.00 0.85 0.13 6.93 -29 -50 4.28 8.12

North East 0.00 0.00 -0.43 7.06 -40 -95 5.66 13.55

Scotland 1.93 2.78 0.53 7.33 -27 -66 5.87 12.27

Rest of UK (excl. London, SE and Eastern) 0.76 3.76 0.95 6.88 -11 -50 2.48 11.55

MARKETVIEW

Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.

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