Industrial and Retail Sectors Drive Positive All Property Total Return in September 2024

Commercial capital values increased by 0.2%, according to the latest CBRE UK Monthly Index, underpinned by a rise in the Industrial and Retail sectors. Rental values increased by 0.3% over the month, while total returns were 0.6%, driven by the industrial and retail sectors.

In Q3 2024, all property capital values increased by 0.3%, and rental values rose by 0.7%, while total returns for Q3 were 1.7%.

The Retail sector saw capital values rise by 0.4% over the month. Retail Warehouses recorded a capital value increase, while Shopping Centre capital values also rose. However, Standard Shop capital values decreased over the month, driven by Shops in the South East.  Retail rental values also increased by 0.3% in September. Retail Warehouses and Shopping Centre drove the increase in rental values at a sector level, as Standard Shops posted a small fall rental values. The Retail sector recorded the highest total return of all sectors, with a month-on-month total return of 1.0% in September. Retail total returns were 2.2% throughout Q3 2024.

Office capital values recorded a fall in capital values after consecutive months of remaining stable, declining by -0.2% in September. Both Central London and Outer London/M25 Office capital values remained flat throughout the month. Office rental values increased by 0.1% in September. Rest of UK Office rental values increased slightly, while Central London Office rental values posted a small fall. Outer London/M25 Office rental values remained flat. Monthly total returns for the office sector were 0.3% throughout September, and quarterly total returns were 1.1% in Q3 2024.

The Industrial sector recorded the highest capital value growth in September, with values rising by 0.5%. Industrials in the South East (0.6%) slightly outperformed Industrials in the Rest of UK (0.4%) in terms of capital value performance over the month. Industrial rental values increased by 0.5% in September. Rental values across the two regions increased at the same rate as capital values. Month-on-month total returns for the sector were 0.9% in September, and quarterly total returns were 2.2%.

Jennet Siebrits, CBRE’s Head of UK Research, said:
“After subdued activity in the summer, the market rebounded in September and this was reflected in the Monthly Index results. As has been the trend through much of 2024, the Retail and Industrial sectors drove all property total returns. The retail sector boasted the strongest income return, and the industrial sector continued to see rental values rise. Meanwhile, capital value growth for Central London offices has diverged from that of Regional offices over the last few months.”

“Although there is some uncertainty in the outlook owing to the upcoming budget, we still anticipate that the market will benefit from upcoming interest rates cuts. We expect that the Bank of England will cut its base rate again in November, with more reductions anticipated in 2025. These will lead to a decline in borrowing costs for real estate investors, and boost investment activity.”