Rents for prime Central London retail space soar in Q4 2015

Prime Central London retail space has experienced its fastest growth in rent since 1988, with prime rents soaring by 9.0% in the last quarter of 2015, new research shows.

According to the latest Prime Rents and Yields Monitor from the CBRE, rents for high street shops in Central London rose by 18% annually in 2015.

Of all the retail locations in Central London monitored by CBRE, one third saw rental increases in the last three months of the year.

Growth was more modest across the rest of the UK.

The research found that prime retail rents grew by 0.8% in the final quarter of last year, and the CBRE has estimated that capital values rose by 1.4%, collectively having little impact on yields which have stayed at approximately 6.0%.

On an annual basis, prime rents and estimated capital values for retail space outside of Central London rose by 1.0% and 3.2% respectively.

Conversely, over the Christmas period, the busiest season of the year for UK retailers, footfall fell by 3.9% and retail sales increased by 0.1% compared to December 2014.

Bad weather and the growing popularity of online shopping have been cited as the reasons behind these figures. Over the same period, online retail sales grew by 15.1%.

While not quite comparable to the rise in UK retail rents, CBRE discovered significant growth in office and industrial sector rents.

Industrial sector rents saw an increase of 0.8% in Q4 (6.8% for the year), with the North West and Scotland experiencing the sharpest rises.

Driven by strong annual growth in the M25 North (7.4%) and M25 South (7.3%) zones, office rents rose by 1.7% in the last quarter of 2015 and 6.5% annually.

UK commercial property rents grew overall by 1.3% in Q4 and 5.0% over 2015 as a whole.

Most locations experienced a steady yield in Q4, resulting in quarterly and annual yield shift of -1 and -24 basis points respectively

Phil Cann, head of UK retail, CBRE, said:

“The Christmas period has been a mixed bag for retailers, with retail sales rising slightly on December last year, despite a marked retreat in footfall from UK high streets. Nevertheless, Central London continues to boast some of the most sought-after retail spaces in the world, a fact brought to light by the quite remarkable jump in rents toward the end of 2015.

“Luxury retailers are chasing very limited available stock, sending rents soaring as they pay to place themselves at the heart of London’s luxury marketplace.”

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