Prime occupier markets weaker in Q2 – CBRE

Prime occupier markets were weaker overall during the second quarter, says the latest Prime Rent and Yield research from CBRE, as a result of the renewed decline in rental values after a period of rental stability. The decline in prime rents in the retail sector more than outweighed modest gains in the offices and industrial sectors, leading to an overall 0.1% decrease at the All Property level. However, Central London office and retail occupier markets remained buoyant, the firm notes.

CBRE says the consumer sector remains fragile, as seen in the deterioration in the high street, shopping centre and retail warehouses sectors within retail. This is having an effect on occupier space requirements. Yields came in by 9bp for retail warehouses during the quarter; industrial property yields were more or less flat.

Prime yields dipped 5bp overall during the quarter, with the All Property average prime equivalent yield remaining at 6.1%. CBRE says such slow downward pressure “is characteristic of a market where investor appetite is slowly dwindling”. The firm notes that transaction volumes were weak during Q2, with only £6.2bn purchased during the quarter (according to PropertyData) compared with £10.1bn in the first quarter of the year.