Industrials boost UK all-property values in 2021: CBRE

UK commercial real estate capital values increased 3.7% in December 2021 according to property consultant CBRE. The firm’s Monthly Index for December revealed “the greatest monthly increase in values for all commercial property in the history of the Index,” the firm said.

The figure took the All-property capital value growth for the year to 13.8%. The firm said this growth was predominantly driven by exceptional month-on-month performance in the Industrial sector.

In December, Industrials reported capital value growth of 8.4%, by far the largest monthly increase for Industrials, or any other sector, in the history of the Index. Strong demand for logistics assets drove record levels of investment in the sector during 2021.

In the last quarter of the year capital values increased 13.9%, a greater increase than the sector had posted in the previous two quarters combined and taking annual growth to 35.6%, making industrials the strongest performing sector for the sixth consecutive year.

Industrial rents increased 2.3% over December, 4.1% in Q4 and 9% during 2021. Total returns for the year were 41.3% but in the UK’s South East region were 43.8%. Industrial performance contrasted with the office sector where capital values increased by 0.6% in December and 3.9% for the quarter, bringing annual capital growth in the office sector to 4.3%, which was nevertheless the strongest annual performance since 2017.

Retail capital values increased 1.8% in December, the largest monthly increase since March 2010. Q4 capital growth was 3.8% and annual growth, 6.3%.

Retail Warehouses was the standout subsector, with capital values increasing 17.2% over the year.

Retail rental values declined -0.1% in December and -1.7% over the year, weakened by shopping centres, which reported falls in capital and rental values of -12.1% and -4.9% respectively.

“Industrial sector performance was ground-breaking, with monthly and annual growth rates in excess of anything previously recorded by the Index,” said Toby Radcliffe, senior analyst, CBRE UK. “Industrial annual capital growth in 2021 was greater than the combined growth over the previous three years, clearly illustrating the strength of demand for the sector. Meanwhile the Retail and Office sectors experienced significant recoveries in capital values following the declines sustained during 2020 as a result of the pandemic.”