Take-up fell by 48% to 537,800 sq ft over the course of the month, 49% below the 10-year average of 1.0m sq ft. Availability increased by 1% to stand at 13.8m sq ft, still well below the 10-year average of 14.6m. The Central London vacancy rate increased by 20bps to 3.5%. Under offers fell by 3% to stand at 2.9m sq ft. A total of 1.9m sq ft of development and refurbishment space has completed so far in 2016. A further 4.6m sq ft is expected to complete before the end of the year.
Rental values hold firm for second full month after EU referendum Rental values for All Property remained stable in August 2016. Capital values fell by -0.5% over the month, a significantly smaller decrease than July’s -3.3%. All Industrials performed the strongest, reporting capital and rental value growth of -0.2% and 0.0% over the month. Office rents continued to fall, recording -0.1% rate of rental decline. Only All Retail saw an increase in rental values, rising 0.1% over the month.
H1 2016 UK Office Market Overview - key takeaways: UK GDP forecasts have been revised down following the EU Referendum result. However, the outlook is still one of growth, albeit at a slower rate. A recession is not anticipated. The market and the economy is very much sentiment driven at the moment, which can make firm predications difficult. There was a varied picture of occupier demand in H1 2016 in the core regional markets. Some cities have had a strong start to the year, whereas others have struggled relative to recent past performance. Cities with improved levels of take-up this year, compared to 2015, include Bristol, Glasgow and Liverpool. Against each city’s five year average Birmingham, Edinburgh and Southampton can also be added to the list of cities performing above trend over the course of the last six months. Transaction activity is continuing. Few occupier deals have yet been lost due to the EU Referendum result. The only exceptions are a few deals where ‘Brexit’ is being cited as the explanatory factor for pulling out of a transaction – but in fact there was some other underlying issue. Investor appetite for regional office markets was surprisingly strong in H1 2016, with approximately £2.2 billion spent on offices around the UK, beyond London and the South Eastern regions.This level was around £200 million up on the first half total of 2015. Given uncertainty around the political and economic outlook it is not surprising that some market participants have put major decisions on hold until there is more clarity and evidence of any impact on property pricing. However, good quality real estate with a long, secure income stream (which is exactly what property funds invest in) is likely to remain attractive to investors.
CBRE Long Income Index – Negative Q2 capital return of -0.01%, pulled down by Supermarkets and Offices. • Hotels outperformed for the second quarter, with growth of +0.79%. • Post EU referendum Market Review – Lee Bruce shares his thoughts on how Brexit has affected demand for Long Income investments and subsequent pricing
UK prime commercial property rents climb 1.0% in Q2 Rental values for UK prime commercial property grew by 1.0% in Q2 2016. 8% of CBRE monitored locations recorded increasing rents, while 1% recorded decreasing prime rents. Prime yields and estimated capital values for All Property both remained relatively flat despite Q2 being characterised by uncertainty around the EU Referendum.