London Office Rental values hit double digit growth for first time since financial crisis Total returns for all UK commercial property were 0.9% in October, driven by capital value growth of 0.5%. So far this year capital values have increased by 6.8%, resulting in 11.6% total return for the last ten months. Rental value growth remained at the same level as in the previous month, 0.4%. Over the year to date, rental values increased by 3.2%. Rental values for Central London offices increased by 1.3%, fifth time this year when rental value growth crossed the 1.0% mark. For the last year rental value growth was recorded at 10.3%.
Out of Town shopping centres values jump 6% in Q3 Prime rental values continued to increase in Q3 2015 recording 1.1% growth over the quarter and 3.7% over the year to date. Prime yields fell by an average of -6 basis points over the quarter but to 5.4% at the end of Q3. So far this year, yield shift has been -23 basis points. Shopping centres outperformed other sectors in terms of capital value growth, driven by strong performance by Out of Town shopping centres.
Take-up in Central London for October 2015 1.2 million sq ft, 10% above the 10-year average but 16% lower than the previous month. Availability increased by 4% in October to stand at 10.9 million sq ft. Despite the increase, availability remained below the 10-year average of 14.9 million sq ft. Under offers fell by 1% to 3.8 million sq ft in October. Under offers remain significantly above the 10-year average of 2.8 million sq ft. The largest deal of the month saw Royal Bank of Canada acquire 221,600 sq ft at 100 Bishopsgate.
Review of National office market performance (excluding London) in H1 2015. The key trends to note: Vigorous occupier demand has led to sustained and strong levels of office space take-up with most core regional markets matching or exceeding long term averages Stand-out cities, where transactional volumes were particularly high were Manchester, Birmingham, Leeds and Edinburgh. A steady flow of deal activity was recorded in the South East and we have expectations of a stronger level in H2 Pre-letting has returned in strength in core markets. The stand-out example is the HSBC pre-let at 2 Arena Central in Birmingham Investor appetite for regional office markets has continued unabated in the first half of 2015 and is on course to match or exceed the 2014 total by year end Substantial new development is in progress but shortage of Grade A stock is likely to remain an issue in certain locations due to the levels of occupier demand and the increased pre-letting activity being seen.
Last quarter likely to see the strongest volume of activity in NI’s CRE market Up to 300,000 sq. ft. of office leasing activity is likely to be recorded in Belfast by yr end 2015 Prime office rents remain steady at approx. £16 per sq. ft. Investment spend of up to £500 million expected by yr end 2015 Activity in the retail sector continues to strengthen with a busy Christmas trading period now in prospect Retail vacancy rates have continued to decline across the region First increase in prime industrial rents in NI in several years, with prime headline rents now in the order of £3.50 psf Increase in planning activity in the Belfast hotels sector Some concern locally at the volume of student accommodation schemes that are entering the planning process