UK multifamily outperforms commercial property: CBRE

Multifamily capital values in the UK rose by 1.2% over the year to March 2023 and rental values increased by 8.2% over the same period which was better performance than any other commercial property type during the year to 2023, according to CBRE.

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The movements also offset the negative impact on capital values of a rise in capitalisation rates which increased by 25 basis points for the year to March 2023 according to the firm’s inaugural UK Multifamily Index report. Capitalisation rates increased by 25 basis points for the year to March 2023.

Assets located outside of London drove capital value growth more than assets located in London during the same period. Assets outside of London had a reported increase in capital values of 2.5% compared to a decline of 0.7% for assets in London.

On the other hand, reported rental growth was stronger for London assets, rising 10.1% compared to 7% outside of London. Yields rising more sharply in London as opposed to yields outside of London explains the capital’s lower capital growth for multifamily assets.

Retail capital values decreased by 11.6%, office capital values by 14.2% and industrial by 25.9%. With an increase of 1.2%, multifamily assets were the only commercial property type to experience growth.

CBRE’s head of UK research Jennet Siebrits said: “It was important for us to include multifamily in our performance monitoring as it’s developed into a mainstream investment asset over the past decade. While ten years ago residential investment made up just 3% of total UK CRE investment it now makes up 15%. According to our latest investor intention survey, it’s now the most popular asset class for investors into the UK – with 30% selecting residential as their favoured sector. This reflects the growing need for quality rental stock in the UK.”