Increased strength in demand sends the EMEA Prime Rent Index up by 40 basis points to 2.1%. Strong growth in leasing activity across Western Europe while take-up across Southern Europe pales as only two markets see positive increase in levels. EU-28 Vacancy Index falls for a third consecutive quarter highlighting continued shortage of supply in the market. CEE markets continue to dominate development completions across EMEA.
Less than 90,000 sq. ft. of office lettings signed in Belfast in the first half of the year but expected to be significantly surpassed in H2 2015 Prime office rents increased again in recent months and now stand at approximately £172 per m2 (£16 per sq. ft.). Although plans to cut corporation tax to 18% by 2020 were announced in the recent UK budget, more radical plans to give Northern Ireland autonomy to set its own rate of corporation tax now look less likely to materialise The retail sector has been relatively busy over the Summer months with a number of new entrants looking at opportunities and a number of new store openings taking place The vacancy rate on Belfast’s prime pitch is now approximately 8.8%. A number of investment opportunities are currently being marketed across the region and several others are due to be formally launched for sale over the coming months Prime yields remain relatively stable as the Autumn selling season commences A busy Autumn season is now in prospect with strong volumes of activity anticipated in all sectors of the market in Northern Ireland over the next few months
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.
Total returns slow in July but investment continues to grow rapidly Total return on investment in UK commercial property fell to 1.2% for the month of July, from 1.3% in June. Rental values grew by 0.3%, slower than the rate for June (0.5%). Capital value growth was 0.7%, down from 0.9% recorded in the previous month. After the solid performance recorded in the second quarter of 2015, July’s returns in Central London were slightly lower. There is a geographic divergence for industrials and highs street shops, in particular for rental value growth. In both sectors, South East outperformed the Rest of UK.
UK commercial property prime rental values continue to increase. 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. 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. Whilst rental value growth was more evident for offices in Central London, South East and Eastern, yield shift was more even across the UK.