Retail decisions under pressure from weaker consumer confidence
CBRE has published research further highlighting the strength of the office and retail markets in central London compared with weakness seen elsewhere. With concerns about consumer confidence persisting, it is no surprise that high-street shops (outside central London) continued to suffer during the fourth quarter of 2010, says the firm’s EMEA chief economist Peter Damesick. He expects the combined effects of tax rises, benefit cuts, inflation fears and unemployment worries to shape future occupier decisions in the sector.
The stable prime rents for UK commercial property overall (+0.1%) during the final quarter of 2010 mask considerable differences between the sectors, CBRE notes. While the market for office space to let improved during Q4, retail experienced further weakness. And central London once more led the pack with strong growth in both the office and retail sectors.
Yields were flat across the regions in Q4 but in central London the continued strong investment market pressured yields downwards for retail and for office properties, CBRE says. The CBRE All Property average prime equivalent yield fell 10bp to 6.2%.
Within the retail sector, regional high-street shops saw further weakness in the fourth quarter, with prime rents down 0.5% after a stabilisation earlier in the year. Prime shopping centres and retail warehouses also had a weak quarter, as prime rents fell 0.7% and 0.5% respectively. In office markets, the picture was brighter, with many regional markets enjoying positive growth – prime office space recorded rental growth of 1.3% in Q4. Industrial rents for prime properties dipped just 0.1% for the quarter, reflecting weakness in the North West and North East regional markets – many other prime occupier markets were stable.
