MARKETVIEW United Kingdom Monthly Index, May 217 City office rental values fall for second month in May All Property.9 All Offices 1. All Retail.8 All Industrials.9 *Arrows indicate the rate of change of total returns for May. Capital values increased.4 at the All UK Property level in May 217. Across the UK rental values rose.1 on average over the month. The Office sector outperformed the other main sectors in terms of capital value growth, reporting an increase.6 for May. Rental value growth in the Office sector (.1) was outpaced by the Industrial sector with a.2 rise over the month. Industrial capital values increased by.5 in May, driven by growth of.6 in the South East. Capital values in the Retail sector increased.3, while rental values remained stable. Figure 1: Rental Value Growth on UK Commercial Property 1- month 3-months 12-months 5. 4. 3. 2. 1.. All Property Source: CBRE Research, May 217 Figure 2: Total Returns on UK Commercial Property 1- month 3-months 12-months 12. 1. 8. 6. 4. 2.. All Property Source: CBRE Research, May 217 May 217 CBRE Research 217, CBRE Limited 1
MARKETVIEW UNITED KINGDOM MONTHLY INDEX Capital values across UK commercial property increased.4 in May 217. The national average was pulled up by Central London offices, where capital growth was the result of yield movement. All property rental values increased.1 over the month. The Office sector recorded capital values increasing by.6 on average in May, boosted by West End and Mid Town offices where capital values increased by 1.1 over the month due to yield movement. Rental values increased by.1 overall in the Office sector. City office rental values fell -.1 for the second month, while Outer London/M25 offices boosted the national average with rental value growth of.3. Retail capital values increased by.3 across the UK in May, pushed up by the.6 increase reported by Retail Warehouses. High street shop capital values rose.2 over the month. For the second consecutive month, Shopping Centre capital values fell -.1. Rental values were stable for the month. South East high street shops reported rental values declining -.1. Capital value growth in the Industrial sector slowed slightly to.5 in May from.6 in April. While Industrials in the Rest of UK reported capital value increasing.2 over the month, South East Industrial capital values rose.6. Rental values in the sector increased.2 in May, driven by South East Industrial performance of.2. Industrials in the Rest of UK recorded stable rental values. This was largely another steady-as-she-goes month for UK commercial property, with capital growth and total returns at respectable levels, but driven by yield movements rather than rental growth. For the second successive month, City offices reported a modest fall in rental values. However, the run-up to today s General Election seems to have had no noticeable effect. Figure 3: Investment Market Returns (12 months to the end May 217) Submarket Total Returns Capital Value Growth Property 4.6 -.9 Equities 24.5 2. Gilts 7.2 3.5 Source: CBRE Research/ Macrobond, May 217 Figure 4: CBRE Short Term Indicators (3 months annualised) Capital Value Growth Rental Value Growth All Offices 5.1 1. Central London Offices 6.5.2 Standard Shops 2.6.1 Retail Warehousing 2.9.4 All Industrial 13. 5.6 All Property 5. 3 1. 5 Source: CBRE Monthly Index, May 217 Figure 5: All Property Short Term Indicators (3 months annualised) 15. 1. 5. (5.) (1.) (15.) (2.) Rental Value Growth Source: CBRE Monthly Index, May 217 Capital Value Growth May 217 CBRE Research 217, CBRE Limited 2
bps pa Q2 213 Q4 213 Q2 214 Q4 214 Q2 215 Q4 215 Q2 216 Q4 216 Q2 217 pa billion Jun-7 Jun-8 Jun-9 Jun-1 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 pa MARKETVIEW UNITED KINGDOM MONTHLY INDEX Figure 6: Year on Year Total Return 25 2 15 1 5 Figure 7: UK Prime vs. Secondary All Property Yield (excl. Central London) 6 5 4 3 2 1 Spread All Prime All Secondary 12 1 8 6 4 2 Source: CBRE Monthly Index, May 217 Figure 8: Year on Year Capital Value Growth Source: CBRE Monthly Investment Yields, June 217 Figure 9: CBRE Investment in the UK 2 16 12 8 4-4 -8 25 2 15 1 5 Central London Offices Retail Others Rest of UK Offices Industrials Source: CBRE Monthly Index, May 217 Figure 1: Year on Year Rental Value Growth Source: Property Data, May 217 Figure 11: Equivalent Yield Shift (3-month rolling total) 1 All Retails Outer London/M25 Offices All Industrials Central London Offices Rest of UK Offices 8 4 6 2 4 2-2 Source: CBRE Monthly Index, May 217 Source: CBRE Monthly Index, May 217 May 217 CBRE Research 217, CBRE Limited 3
MARKETVIEW UNITED KINGDOM MONTHLY INDEX Figure 12: CBRE Monthly Index, May 216 All Property Offices Central London Offices Retail Industrials Others Total return.88 1. 1.17.78.94.78 Capital Value Growth.42.6.86.29.48.32 Rental Value Growth.8.7 -.1.1.17.17 Source: CBRE Monthly Index Snapshot, May 217 Figure 13: Property Investment Yields Equivalent Yields Equivalent Yields Prime Shops 4. Leisure Centres: Prime 4.85 Good Secondary Shops 6.75 Prime Offices: West End 3.75 Secondary Shops 9. Prime Offices: City 4. Prime Shopping Centres 4.65 Prime Offices: M25 / South East 5.25 Best Secondary Shopping Centres 6.75 Prime Offices: Major Provincial 5.25 Secondary Shopping Centres 8.25 Offices: Secondary 9. Retail Warehouses: Prime restricted user 5.75 Prime Distribution Unit 4.85 Retail Parks: Prime open user 4.75 Prime Industrial Estates (Greater London) 4.5 Retail Parks: Prime restricted user 5.5 Prime Industrial Estates (Ex Greater London) 4.75 Retail Parks: Secondary 7.25 Secondary Industrial Estates (2 years old) 7.25 Note: Prime yields refer to an equivalent yield for a prime (well specified, well located and rack rented) property let to a financially strong tenant on a lease with a minimum of 15 years unexpired. Numbers in brackets indicate a change from the previous month. Source: CBRE Monthly Investment Yields, June 217 Figure 14: Property Investment Yields. Alternative Sectors Equivalent Yields Equivalent Yields Hotels: Prime London Vacant Possession 4.5 Student: Central London Direct Let 4.5 Hotels: Prime London Management Contract 5.5 Student: Central London University RPI lease 4. Hotels: Prime London Lease 4. Student: Super Prime Regional Direct Let 5.15 Hotels: Prime Regional Vacant Possession 6.25 Student: Prime Regional Direct Let 5.5 Hotels: Prime Regional Management Contract 7.5 Student: Prime Regional University RPI lease 4.5 Hotels: Prime Regional Lease 4.25 Prime London Corporate Pub 3.75 Healthcare: Primary Care 4.25 Prime Regional Corporate Pub 5.25 Healthcare: Care Homes 4.5 Leisure: Prime Leisure Park 4.85 Healthcare: Hospitals 4.75 Leisure: Prime Single Asset Leisure 4.85 Source: CBRE Monthly Investment Yields, June 217 Leisure: Good Secondary Single Asset 7.5 May 217 CBRE Research 217, CBRE Limited 4
MARKETVIEW UNITED KINGDOM MONTHLY INDEX CONTACTS Robin Honeyman Analyst +44 27 182 3346 Robin.honeyman@cbre.com Dominic Smith Senior Director +44 27 182 2369 Dominic.smith@cbre.com CBRE Ltd Henrietta House Henrietta Place W1G NB To learn more about CBRE Research, or to access additional research reports, please visit the Global Research Gateway at www.cbre.com/researchgateway. VALUED INSIGHTS- WANT TO KNOW MORE? Join our upcoming monthly index call as we provide a review of the key trends and performance of commercial property, considering potential challenges and opportunities for the real estate market. To register your interest in joining our next call taking place on Wednesday 12th July, please accept here. You will be contacted to receive confirmation and dial in details. To listen to previous calls, please visit our microsite: valuedinsights.cbre.co.uk. 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.