Prime global rents ‘struggling to achieve growth’ – Knight Frank

Rents in 17 world cities nudged up by an average of just 0.5% in the 12 months to Q1 2017

Nearly three-quarters of the 17 cities tracked by Knight Frank for its Global Prime Rental Index recorded rising prices in the year to March 2017 – but the international annual average pans out at just +0.5%.

Cape Town has seen the biggest rental price inflation, with prime rents escalating by 5.9% annually. Nairobi, at the other end of the table, has seen rents fall by 6.2% year-on-year.

Looking at a slightly broader geography, the Middle East region saw the strongest rise in prime rents (up 1.7%) and Europe the weakest (down 0.3%).

Such slow growth is putting some pressure on investment yields, particularly when combined with relatively strong capital value growth in prime markets.

Both annual capital and rental growth averaged 3% a year between Q1 2007 and Q1 2015, but there’s been some divergence since: prime capital values have, on a global level at least, averaged +4.1% annual growth since Q1 2015, while rents have stayed pretty flat.

In London, Knight Frank argues that “prime rents continue to bottom out”, as the pace of annual decline slows to -4.9% to March 2017.