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Insight & Opinion

Commercial property rental value growth hit 7-year high in 2014

Author: Jerald

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The rate of growth in rental prices hit its highest level for seven years in the last quarter of 2014, according to the latest figures released by property company CBRE.

In the last few years, the residential market has been the shining star when it comes to rental increases, but investors in the commercial sector are also now starting to see returns that make their assets very favourable.

At the tail end of last year, it was reported that annual returns were nearing some 20 per cent for the commercial property market, and now CBRE has reported that in the final three months of the year, rental prices climbed by more than they have in any single quarter since September 2007.

In the final quarter, rental value growth sat at 3.8 per cent, markedly higher than the 2.8 per cent that was in evidence in the same period at the end of 2013. CBRE added that the rate of increase had been steadily getting faster and faster throughout the whole of 2014.

“During 2014 we have seen prime rental growth strengthening across many UK markets. Prime yields also recorded a substantial improvement, reflecting the growth in investment activity over the last year,” said Michael Haddock, CBRE senior director.

“At a national level, total transaction volume reached £61.7 billion in 2014 compared to £54.5 billion in 2013 and just beating the total reached in 2006,” he added.

Across the year, the office market, which has been improving for some time now, was once again the real star of the sector in terms of capital gains, with investors across the whole of the UK seeing their stock rise in value over the course of 2014.

However, in the final quarter, it was shopping centres and retail warehouses that started to shine and show promise moving towards the New Year. Both of these areas had seen some sharp declines during the first three quarters of the year, but in the final three months, they managed to stabilise, giving investors some sort of promise that this year may be better for their property.

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