Commercial property values and returns fell significantly in 2022

UK commercial property capital values decreased significantly in 2022, and annual total returns were also down, according to the latest CBRE Monthly Index. Capital values decreased 3.0 percent across all UK commercial property in December 2022. Rental value growth for the month was 0.2 percent and total returns were -2.6 percent. For 2022 as a whole, capital values fell 13.3 percent, and annual total returns were -9.1 percent, according to the report.

Retail capital values declined 2.5 percent in December. This was driven by Shops in the ‘Rest of UK’ (-2.9 percent) and Retail Warehouses (-3.1 percent). Rental value growth was 0.1 percent for the Retail sector in December, with Standard Shops reporting the highest rental value increase (0.3 percent). Total returns were -2.0 percent for the Retail sector for the month. Retail capital values decreased 8.1 percent over the full year and annual total returns were -2.1 percent.

Office sector capital values fell 3.0 percent in December. This was predominately driven by Outer London/M25 and Rest of UK offices (-5.3 percent and -3.4 percent respectively), while Central London offices reported a smaller fall in capital value (-2.3 percent). Rental value growth for the Office sector was 0.1 percent in December, and total returns were -2.6 percent. Office capital values declined by 12.1 percent in 2022 and annual total returns were -8.3 percent.

The Industrial sector reported the highest capital value decrease in December at 4.4 percent. Industrials in the South East recorded a larger fall in capital values compared with Industrials in the Rest of UK (-4.9 percent and -3.4 percent respectively). Industrial rental value growth was 0.2 percent for December and total returns were -4.0 percent over the month. For 2022 as a whole, capital values for the Industrial sector fell by 21.0 percent and annual total returns were -18.1 percent.