London office market shows strength in uncertain time for commercial property market

June 27, 2016

UK commercial property rental rates grew 0.1% across the UK in May, according to the latest index – slightly down on the 0.2% per month displayed for the last three months.

Commercial capital values also grew by 0.2%, continuing the growth trend seen since the start of the year, data from the CBRE monthly index revealed.

Parts of London performed well, especially the city where office rental values grew by 0.6% last month, compared to just 0.1% in both March and April.

However, some parts of the capital demonstrated flat or slightly negative performance, such as the West End which recorded rental value growth of just 0.1%.

Capital value across the UK grew by 0.2% in May, a figure which is in-line with the level of growth seen throughout the year, with the exception of March when values were hit by the one-off impact of stamp duty changes.

Total returns followed the same pattern as capital values, demonstrating a steady growth of 0.6%.

“Commercial rents and capital values continue to grow in a period of great uncertainty. The London office market has seen some volatility, but the fundamentals of the market are strong,” said Miles Gibson, head of UK research at CBRE UK.

“This time next month, we’ll have a clearer idea of the direction capital values and rents will go in the second half of the year, and a flavour of the pace at which they will get there,” he added.

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