UK commercial property capital values down 0.3 per cent in September

Capital values fell -0.3 per cent for the third consecutive month across all UK Commercial property in September 2020, according to the latest CBRE Monthly Index. 

This took capital value growth to -0.9 per cent over Q3. Over September, rental values decreased -0.2 per cent making the quarterly fall -0.7 per cent. Total returns were 0.2 per cent bringing Q3 returns to 0.6 per cent.

In September the Retail sector posted a -1.3 per cent fall in capital values. All subsectors reported smaller falls than sector average except for Shopping Centres where values decreased -4.1 per cent over the month. This takes the total Q3 decrease in values for Shopping Centres to -7.7 per cent. Capital value growth for the Retail sector was -2.9 per cent in Q3. Rental values declined -0.9 per cent over the month and -2.1 per cent for the quarter. Total returns were -0.7 per cent in September and -1.1 per cent for the quarter.
The Office sector posted capital value growth of -0.1 per cent over the month. Values fell -0.5 per cent over the quarter. Over Q3 2020 Outer London and M25 Offices proved to be the most resilient subsector with 0 per cent capital value growth, whereas all other subsectors reported declining values. Average Office rental values fell -0.1 per cent in September, totaling -0.4 per cent over Q3. Again, Outer London and M25 Offices was the outstanding subsector with rental value growth of 0.2 per cent over the quarter. Office total returns were 0.3 per cent for the month, making returns for the quarter 0.7 per cent.
In September the Industrial sector saw capital values increase 0.7 per cent. Industrials posted positive capital value growth in each month of Q3 taking the quarterly increase in values to 1.1 per cent. Rental value growth was 0.1 per cent in September and 0.4 per cent in Q3. Over the quarter Industrials South East reported an increase of 1.3 per cent in capital values, almost twice that of Industrials in the rest of the UK (0.6 per cent). However, rental values grew faster in the rest of the UK over Q3, at 0.5 per cent compared to the 0.3 per cent in the South East. Industrial total returns for the month were 1.1 per cent, leading to returns of 2.3 per cent over the quarter.
Toby Radcliffe, Research Analyst at CBRE, says: “Q3 has been the strongest of 2020. It reported significantly smaller decreases in capital values at the all property level than previous quarters, leading to positive quarterly total returns for the first time this year. On the current trajectory it now looks possible that 2020 could end with greater total returns and smaller declines in rental and capital values for the year than predicted by the 2020 summer IPF consensus forecast. However, any optimism about the end of the year should be treated with caution due to continuing disruption caused by Covid-19.”