CBRE UK Multifamily Index Highlights Rental Value Growth of 7.7%
Commercial real estate service provider CBRE has released new insights from its UK Multifamily Index, revealing strong growth in rental values for multifamily properties in the UK. According to the report, rental values for these properties increased by 7.7% in the year leading up to March 2024. Additionally, gross rental income saw a growth of 5.3% over the same period.
Despite the positive performance in terms of income, capitalisation rates for UK multifamily properties increased by 38 basis points over the past year. This rise contributed to a decrease in capital values, which fell by 3.2% during the same period. However, this decline was less severe than that experienced in the office and retail sectors.
Jason Hardman, Executive Director of Valuation and Advisory Services at CBRE, commented on the challenging capital market conditions that impacted real estate investments across various sectors. Hardman noted, “The decline in capital values for multifamily assets reflects how capital market conditions have been challenging for real estate investment across the board.”
The report also highlighted the influence of the abolition of Multiple Dwelling Relief (MDR) on capital values. Retail capital values fell by 4.5%, and office capital values dropped by 11.6% in the year leading up to March 2024, partly due to this policy change.
Furthermore, rental value growth for multifamily assets in both London and the rest of the UK remained strong, at 7.7% and 7.8% respectively. However, there was a divergence in capital value growth between London and regional assets, with London assets experiencing a larger decline in capitalisation rates.
Jennet Siebrits, Head of UK Research at CBRE, emphasized the strong rental growth offered by multifamily properties in London and key regional centers. Siebrits stated, “Multifamily offers strong rental growth for assets in London and across the UK’s key regional centers, particularly when compared to the traditional sectors like industrial, office, and retail.”
Overall, the UK Multifamily Index provides valuable insights for investors looking to compare the performance of multifamily properties against other investment property types in the UK real estate market.
