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What is the average increase in commercial rent per year UK?

Commercial rent refers to any sum paid for the use or occupancy of retail space, regardless of the form and payment terms. In contrast, commercial space relates to land, offices, buildings, centres, stores, facilities, and other property used primarily for commercial reasons.

Whether you decide to utilise the commercial property yourself or rent it out to others, commercial rent becomes an essential consideration for investors wishing to invest in commercial property for sale in Kent, London, Surrey and other parts of the UK. A comprehensive review of the UK’s commercial rent growth and decline is here.

By Commercial Property Type 

The commercial rent was not uniform across categories like property time, region and city. Here is a category-wise breakdown of rental prices in the UK;

Industrial Rent 

According to CBRE’s report, in 2022, Industrial prime rents increased by 4.3%. London’s industrials were the growth engine, with premium rents rising 6.9% over the quarter. With a 3.1% increase in rental value, the South East was one of the weakest regions for industrials. This contrasts with 3.2% in the rest of the UK (excluding the Southeast and Eastern regions), showing that tenant demand is still high nationwide despite slower growth than in London. The East Midlands are the only region that did not show a rise in rental values over the quarter, with rental deals remaining level.

The industrial estate sector is forecasted to see the highest rental growth in the United Kingdom and continue growing and outperforming other commercial estate sectors, such as office, and retail, between 2022 and 2026. According to the forecast published by Statista, industrial estate rents are likely to grow by 3.4% per year in this period. 

Retail Warehouse and Office  Rent

The three regions with the most significant increases in office rent in 2022 were the South West (3.4%), Eastern (3.0%), and Key Provincial cities (3.9%). Over the quarter, values increased by 1.3% in Central London. In central London, there was a  -7 bps yield reduction. While city yields remained steady, Midtown Offices reported a 2bps yield increase. The most significant yield contraction was observed by offices in suburban London, at -10bps. Statista, in their latest report, forecasted that Retail warehouse office space rents would increase by 1.6%. Meanwhile, retail warehouse rents rose 1.1% in 2022. Shopping Centre/ standard retail Rent

High Street Shop prime rental values fell by -0.3% in 2022. The only region to report rising rental values was the South West, where rentals rose by 0.9%. The quarter saw no change in the rental prices for shopping centres. 

On average, shop prime yields increased by five basis points but decreased by 23 basis points in the South East. Prime yields for Eastern retailers fell -27 bps. The most significant decrease in yields was reported by East Midlands, at -33bps. Prime yield for shopping centres only went out by 2bps. Furthermore, shopping centres and standard retail will see negative growth of 0.5% and 0.3% per year.

By Region 

The South East and London had the highest prime industrial rentals, according to information gathered in the first quarter of 2022. On the other hand, throughout the same period, the East of England and Scotland had some of the lowest rents for prime industrial estate, with one square foot costing, on average, seven euros.

Rents for retail space in London are the most expensive per square foot. Oxford comes in second, costing an average of £49.51 per square foot, but not by much. York has the third-highest average annual cost per square foot at £47.75. Blackpool offers the most cost-effective retail leasing rates, at an average of £12.45 per square foot per year.

Kensington and Chelsea is the most expensive borough per square foot in London, costing £86.18, 252% more costly than the UK average. With an average price of £63.96 per square foot, the City of London comes in second. At £56.21 per square foot per year, Camden is third in cost, over £30 less than Kensington and Chelsea.

Summary

In short, the Industrial sector remains solid regarding rental value growth.  Prime Office rental values, meanwhile, moderately accelerated their post-pandemic recovery in the first quarter of 2022. Performance in the retail sector is still uneven, with rental increases, declining yields for retail warehouses, stagnant rents, and slowly rising yields for shopping centres. Region-wise, South East and London have the highest industrial and retail property rent, while Blackpool offers the best deals for retail lease rents. 

Pricing is now at a level that investors find more alluring! So, quick, reach out to experts to get advice on best commercial properties for sale in Kent, London and other prime locations across the UK. 

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