The industrial sector has posted capital value growth after four months of decline but offices continue to stagnate, according to the latest CBRE monthly index.

Capital values fell by 0.3% across all UK commercial property in July, while rental values were down by 0.2%.

However, July was the first month since the beginning of the Covid-19 pandemic to enjoy positive returns at all-property level, tallying 0.2%. This was driven by 0.5% income return.

Industrial shines

Capital values in the industrial sector inched up by 0.3% in July. Geographically, the South East was the standout performer after reporting 0.5% growth.

CBRE noted that this represented the first time capital values have increased in any sector since Covid-19 restrictions were introduced in March.

Average rental values in the sector increased by 0.1% during the month, while total returns stood at 0.7%.

Offices stumble

On the other hand, capital values in offices fell by 0.3% over the month, deepening slightly on its decline in June (-0.2%).

The West End and Midtown office markets performed worse than the sector average, posting capital value growth of -0.7%. Their rental values also fell -0.7%, which CBRE highlighted was the subsector’s weakest rental value performance since July 2009.

Overall office rental values also weakened, falling 0.3% in July. Nonetheless, total returns for offices remained positive at 0.1%.

South East boosts retail

The retail sector reported a 0.9% decline in capital values in July. Rental values declined by 0.6% over the month and total returns were 0.3%.

Standard shops in the South East was the strongest performing retail subsector, with capital values falling 0.5% and total returns of 0%. This marked the first time returns emerged from negative territory in any retail subsector since February.

Toby Radcliffe, research analyst at CBRE, said: “Despite the continued fall in values, CBRE’s July monthly index has shown some promising signs. At the all-property level total returns have edged back into positive territory.

“Capital values are increasing for industrials and the value declines across the retail sector continue to decelerate. On the other hand, the office sector has not continued on the trajectory towards recovery, reporting a weaker performance than in June.

“Whether this is a sign of a more prolonged period of stagnation for offices, or whether it can follow in the industrial sector’s wake, remains to be seen.”