The quarterly growth in the All Property Rent Index, of 1.6%, is the second-highest figure recorded in the nineties. There has now been continuous positive quarterly rental value growth since February 1994 and five-year growth is positive for the first time since the recession.
Retail registered 1.6% quarterly growth. Retailers' more competitive policies have resulted in strong upward pressure on rents, with significant premia being paid for prime locations such as Oxford Street. However, rental value growth remains highly concentrated reflecting the 'shrinking high street' phenomenon. Of the locations in our survey, 40% still have rental values below those of May 1992.
Service sector strength is providing the impetus behind strong Office rental value growth. This growth is centred around Central London and the M4 corridor where supply is constrained. Indeed, the market has switched from over-supply to under-supply in less than 12 months along the M4 corridor. Scotland avoided a quarterly decrease for only the second time since 1995.
At 0.9%, quarterly growth in the Industrial sector is the highest since 1990. Lack of development in smaller lot-size sites has provided upward pressure on rents. Industrial units' proximity to road access remains important, as demonstrated by the Hertfordshire A1 corridor where 15 year leases with no breaks are being negotiated. However, such developments are being hindered by the relatively slow recovery in the manufacturing sector.
There has been a reappraisal of historic data. The areas affected are:
All Property: May 96, Nov 96, Feb 97, Retail: South West Aug 90- Feb 97, East Midlands Aug 90 - Feb 97, All Office Nov 93 - Feb 94, May 96- Feb 97, West End Feb 96, May 96, Nov 96, Feb 97, Holborn & Marylebone Nov 95, Aug 96 - Feb 97, Central London Feb 96, Aug 96 - Feb 97, London Feb 96, Aug - Nov 96, South West Aug 90 - Feb 97, East Midlands Aug 93 - Feb 97, West Midlands Aug 90 - Aug 91, May 92 - Feb 93, May 94, Nov 94 - Feb 97, North West Aug 90 - Feb 97, All Industrial Feb - May 93, Nov 93, Feb 95, May 95, Feb 96, Aug 96, Feb 97, East Anglia Feb 97, South West Aug 90 - Feb 97, West Midlands Aug 90 - Feb 97, North West Aug 90 - Feb 97.
Rent Index - Current Prices
% Change Qtr Annual pa Nov 96 Feb 97 May 97 Feb 97 May 96 May 92 -May 97 -May 97 - May 97 All Property 425 429 436 1.6 4.8 0.1 Shops 580 583 590 1.3 3.6 0.5 Offices 343 347 355 2.1 7.0 0.3 Industrials 346 347 350 0.9 1.9 -0.8 Equity Dividend 725 719 748 4.0 8.4 8.4Rent Index - Real Terms
% Change Qtr Annual pa Nov 96 Feb 97 May 97 Feb 97 May 96 May 92 -May 97 -May 97 -May 97 All Property 127 128 128 0.4 2.2 -2.2 Shops 174 173 173 0.1 1.1 -1.8 Offices 104 103 103 -0.3 -0.6 -3.1 Industrials 104 103 103 -0.3 -0.6 -3.1 Equity Dividend 217 214 220 2.8 5.7 5.9 Rent Index - Regional
Nov 96 Feb 97 May 97 All Shops 580 583 590 Central London 601 629 656 Inner Suburban London 486 490 492 Outer Suburban London 518 519 521 Suburban London 505 507 509 London 555 568 581 South East 582 583 587 South West 564 565 569 East Anglia 758 758 759 East Midlands 471 474 488 West Midlands 728 728 736 Wales 742 742 744 North West 577 581 593 Yorks & Humber 491 493 499 North 586 586 602 Scotland 544 544 557 All Offices 343 347 355 West End 481 492 512 Holborn & Marylebone 367 378 398 Central City 310 314 319 Fringe City 301 305 309 Central London 367 374 385 Suburban London 306 310 314 London 347 353 363 South East 346 350 356 South West 613 613 613 East Anglia 320 320 322 East Midlands 440 440 440 West Midlands 717 717 720 Wales 443 443 446 North West 456 459 462 Yorks & Humber 372 376 387 North 269 269 276 Scotland 428 427 427 All Industrials 346 347 350 London 371 373 378 South East 410 410 414 South West 398 405 409 East Anglia 369 369 369 East Midlands 375 375 380 West Midlands 373 380 380 Wales 321 321 321 North West 317 317 318 Yorks & Humber 264 264 264 North 253 253 261 Scotland 293 293 300
% Change Qtr Qtr Annual p.a. Nov 96- Feb 97- May 96 - May 92 Feb 97 May 97 May 97 May 97 All Shops 0.5 1.3 3.6 0.5 Central London 4.6 4.4 15.9 7.1 Inner Suburban London 0.9 0.4 3.1 0.2 Outer Suburban London 0.2 0.4 1.8 -0.6 Suburban London 0.4 0.4 2.2 -0.4 London 2.3 2.3 8.3 2.8 South East 0.2 0.7 1.8 -0.3 South West 0.2 0.7 1.5 -0.3 East Anglia 0.0 0.1 5.5 0.9 East Midlands 0.8 2.8 5.5 -0.4 West Midlands 0.0 1.1 2.5 -0.2 Wales 0.0 0.2 1.2 -0.4 North West 0.8 2.1 3.9 2.9 Yorks & Humber 0.6 1.2 3.5 0.1 North 0.0 2.8 4.0 1.7 Scotland 0.0 2.3 5.9 3.0 All Offices 1.3 2.1 7.0 0.3 West End 2.2 4.0 12.7 2.4 Holborn & Marylebone 3.2 5.2 17.6 -0.8 Central City 1.2 1.6 7.5 0.7 Fringe City 1.1 1.3 6.8 -2.7 Central London 1.8 3.0 10.7 0.7 Suburban London 1.1 1.3 4.9 -0.8 London 1.6 2.7 9.6 0.3 South East 1.1 1.7 5.4 -0.2 South West 0.0 0.0 1.5 -1.6 East Anglia 0.0 0.6 1.8 -3.0 East Midlands 0.0 0.0 0.0 4.0 West Midlands 0.0 0.4 2.2 -0.9 Wales 0.0 0.8 3.3 1.1 North West 0.6 0.6 1.8 1.2 Yorks & Humber 1.2 2.8 4.0 2.5 North 0.0 2.5 2.5 1.7 Scotland -0.2 -0.0 -5.1 -1.6 All Industrials 0.4 0.9 1.9 -0.8 London 0.6 1.2 2.3 -1.4 South East 0.1 0.8 1.8 -1.2 South West 1.8 0.9 3.6 -0.2 East Anglia 0.0 0.0 0.0 -2.9 East Midlands 0.0 1.5 0.2 -0.9 West Midlands 1.8 0.0 2.7 2.1 Wales 0.0 0.0 2.5 1.7 North West 0.0 0.3 -0.2 -0.9 Yorks & Humber 0.0 0.2 2.0 0.1 North 0.0 3.2 3.2 2.7 Scotland 0.0 2.5 2.2 3.7
For further information, contact: Alan Patterson, Head of Investment Research, Tel: +44 (0) 171 629 7666, Fax: +44 (0) 171 409 3016