No Brexit Panic, As Commercial Property Rent Goes Up By 0.2% In June!

Jul 14 2016

Darren Best

The past few weeks has seen one of the biggest shake-ups known to British politics. An uncertainty and anxiety is looming, whilst the future of British politics stabilises and businesses, both small and large can take a deep breath and relax, once contingency plans and trading agreements are finalised by the government.Fears amid Brexit, were pointing towards a fluctuating commercial property market. However, the latest CBRE monthly index has revealed that the commercial property markets has returned, and rental values has seen a steady growth in June. So no Brexit Panic, as commercial property rent was up by 0.2% in June! Despite a positive month for property investors and developers, the capital value growth has slowed. Rents in June had increased by 0.2%, matching its figure for the year to date, despite a rocky road since we voted to leave the European Union. Capital values had grown by 0.1% over the month, with a drop of 0.2% in May. However, CBRE had commented that the total return of 0.6% for the month had matched returns almost every month for the last year to date. Despite rental values increasing since Brexit, in the first half of 2016, rental value growth hit 1.1%, far behind the 1.7% seen in the same period of 2015. Capital values were also seen to have improved by 0.6% for the first six months of 2016, though shy of the 4.1% in the first half of 2015. Total returns were also significantly lower from 6.7% in the first half of 2015, down to a shocking 3% in the first half of 2016. The report by CBRE had demonstrated that the lower return could be partly blamed by an increase of stamp duty in March. Offices in London also saw rent grow by 0.3% in June alone; an improvement of 0.2% from April and May. Despite an overall increase in rental values, the office market did see some outliers who deviated from the overall trend. The West End and Midtown officers were flat on rental value, down from 0.1% growth in May. Whilst in the City of London, rent has dipped to 0.2%, a fall of 0.3%, when it was 0.5% in May. Miles Gibson, head of research at CBRE UK has commented on the analysis: ‘Overall, rents and capital values continued to grow in June, with the industrial sector in particular showing strong growth in a month of significant uncertainty. Clearly, capital value growth has slowed, but occupier demand has remained high across the country, pushing up All Property rental growth as fast as any other month this year,’ ‘These figures reflect CBRE valuations carried out in the days immediately following the referendum vote, but July’s monthly index will give a much clearer indication of how monthly valued assets have been affected by the uncertain environment for commercial property in the aftermath of the Brexit decision. In the meantime, CBRE’s 30 June valuations incorporated a formal Valuation Uncertainty clause,’.

Image credit to Paulo ZGPhotography/

 And to further add to the commercial property effect since Brexit, one of London’s leading skyscraper buildings, the Chessegrater, is finally full. Its developers have declared that by having a full office building, it will majorly contribute and boost the commercial property market, in the wake of the vote to leave. The Cheesegrater is 225 metres tall and is situated in the heart of the insurance district, and has finally struck deals with existing tenants Kames Capital, Rothesay Life and Amlin to take the last three floors of the buildings. Formally known as the Leadenhall building, alongside the Walkie Talkie building, these were the first two tower developments to have risen out of the ashes of the economic crash in London. Tim Roberts from British Land, one of the companies to broker the deals has commented: ‘to receive commitments from occupiers so soon after the EU referendum is not only a tremendous endorsement of the building, it underlines the enduring appeal of London. Those who work in the City and large commercial property firms have yet to panic as although the UK’s status outside of the EU is yet unknown, leasing agents have commented that a shortage of offices is providing landlords with an advantage to alter contracts. Tenants are now looking to sign more flexible contracts, including three-year break clauses, in order to reassess once negotiations are completed. 

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