September monthly Index – All property on track to recover from pandemic capital value declines by the end of the year.
On our last Monthly Index call we looked at the increase in capital and rental values in September, which sectors have performed the best, and what it all means for the rest of the year.
Record month for capital values
September was a record month for capital values in some sectors, with the All Property figure increasing by 1.6%. This is the highest All Property capital growth figure since June 2014. The main contributors to this increase are Retail Warehouses and Industrials, and we will touch on each of these in turn.
Out of Town Retail & Industrial in strong demand
Retail Warehouses saw growth of 2.9%, the third consecutive month of record-breaking growth, as a wide range of investors return to this sector. High Street Retail saw an increase in capital values of 1.1% off the back of a limited number of strongly performing assets in the South East. Industrial’s strong performance continued in September with capital growth of 3.1%, the sector’s highest monthly increase in the history of the index, and the fourth month this year to post capital growth in excess of 2.0%. Whilst this growth was across all regions, the South East saw stronger capital growth than the Rest of the UK, with increases of 3.5% and 2.4% respectively.
Rental value growth continues to be led by industrial
Rental values rose by 0.3% . Industrials increased by 0.8% across the UK and while offices were broadly neutral, South East shops finally posted a positive month on the back of a limited number of strong performers.
Q3 reported the strongest capital growth of any quarter for over 11 years and with total returns for 2021 already at 10.7%, a double digit returns outcome for the year is assured. If monthly growth in Q4 matches the average rate during Q3 (1.2%), 2021 capital growth for all property will reach 10.2%. More than recouping the -7.6% peak to trough fall in values at the all property level which came as an effect of the pandemic. If this double-digit growth figure is recorded in 2021 it will make it the strongest performing year since 2014. However, whether Q4 can match the rate of growth reported over Q3 remains to be seen.
The next monthly index call is on Wednesday 10th November at 10am. Please contact Janette Kenward to be added to our invite list and for any questions please contact David Tudor and Toby Radcliffe.