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 8.4
Rent 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