Commercial property yields have been on the move. So has the evidence that supports them.
Anyone who has been instructing valuers, reviewing accounts, or advising investors over the past three years already knows this, but the implications for how commercial property should be valued, and what evidence should be used to support those valuations, are worth setting out clearly.
This article is aimed at accountants, finance directors, and investors who need to understand not just what a commercial valuation says, but why the methodology and evidence behind it matter as much as the headline figure.
What a yield actually tells you.
A capitalisation yield (sometimes called an all-risks yield) is the rate at which a valuer converts an income stream into a capital value. If a shop produces £20,000 a year in rent and a valuer applies a yield of 8%, the capital value of that income is £250,000. If they apply 7%, it’s £285,714. The difference — almost £36,000 — comes entirely from one percentage point in the yield.
This is why yield selection is the most consequential judgment a commercial valuer makes. It is also the judgment most susceptible to being wrong when markets are moving quickly, because yields are derived from transaction evidence, and transaction evidence takes time to filter through.
When interest rates rise sharply, as they did from late 2021 onwards, the cost of debt for property investors increases. This compresses the return available from any given income stream, which means buyers pay less for the same rent — in other words, yields move out. The problem is that completed transactions, which are the primary source of evidence for yield selection, typically reflect sale prices agreed months before they are registered. In a fast-moving market, last quarter’s evidence can already be stale.
— The lag problem In a fast-moving market, last quarter’s evidence can already be stale.
What has actually happened to yields.
The period from 2022 to 2024 saw one of the most significant repricing events in the commercial property market for a generation. Bank Rate moved from 0.1% in late 2021 to a peak of 5.25% in August 2023, where it remained until August 2024. The effect on commercial yields was substantial, though uneven across sectors.
Where the repricing landed.
| Sector | Late 2021 | End 2024 | Direction |
|---|---|---|---|
| Prime industrial | ~3.25% | 5.00 – 6.00% | Out, sharply |
| Prime office (Central London) | ~4.00% | 5.50 – 6.50% | Out, materially |
| Prime retail (high street) | ~5.50% | 6.50 – 7.50% | Out, measured |
| Secondary retail | ~7.00% | 8.00 – 12.00% | Out, selective |
| Indicative ranges. Asset-specific yields vary by location, covenant, lease length and condition. | |||
Prime industrial, the asset class that had been the market darling through the pandemic, saw the most dramatic correction. Yields that had compressed into the 3% range by late 2021 moved out sharply, with prime logistics assets repricing to 5–6% through 2023. Secondary industrial followed, though with less precision. Prime retail and office yields also moved, though the starting point was already higher and the adjustment less dramatic in proportional terms.
Secondary retail (local parades, secondary high streets, out-of-town retail outside major catchments) was already under structural pressure before the rate cycle turned. Yields in this sector had been softening since 2017 as e-commerce reshaped occupier demand. The rate environment accelerated that trend, and by the end of 2024, buyers for secondary retail assets were demanding yields in the 8–12% range depending on location, occupier quality, and lease length.
By early 2026, the picture is beginning to stabilise. Bank Rate has fallen to 3.75% and is expected to reduce further, credit conditions are gradually improving, and prime sectors are beginning to see tentative yield compression. Secondary markets remain selective. The direction of travel is more positive than it has been, but the journey from pricing trough to recovery is rarely linear.
Why this matters for valuations.
If you are commissioning a valuation today (for audit, accounting, disposal, or investment purposes) the yield environment your valuer is working in is materially different from the one that prevailed three years ago. A valuation produced in 2021 at a 5% yield on a retail investment is not a reliable guide to value in 2026. That much is obvious.
What is less obvious, but equally important, is that even within the current market, evidence selection can produce meaningfully different outcomes. A valuer who selects comparables from twelve months ago is working with a different market than one who uses evidence from the last quarter. A valuer who applies a yield derived from prime assets to a secondary property is applying the wrong benchmark. A valuer who relies on asking prices rather than completed transactions is not using evidence at all.
— The practical question How current is the evidence, and how comparable is it really?
What good evidence looks like.
Whether you are instructing a valuation for accounts, seeking a rent review opinion, or advising a client on a disposal, the evidence behind the figure matters. Good evidence has four characteristics, and a defensible valuation rests on all of them.
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01
Current.
Ideally from within the last six to twelve months, and certainly from within the same phase of the market cycle. Evidence from a different rate environment requires careful adjustment to be meaningful — and the further you reach back, the more those adjustments are doing the work that the evidence itself should be doing.
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02
Genuinely comparable.
Comparable in use class, size, location, and quality. Adjustments for differences are legitimate and necessary, but the further the comparable is from the subject, the more work those adjustments are doing, and the more judgement is involved. Applying a prime yield to a secondary asset because the prime evidence is “close enough” is the most common mistake in this space.
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03
Verifiable.
Completed transactions registered at Land Registry, or lettings documented by agents with knowledge of the deal. Not asking prices, not unverified rumour, and not headline figures stripped of any incentive packages, rent-free periods or capital contributions that may have been part of the deal.
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04
Understood in context.
A single comparable transaction can be misleading. A pattern of transactions tells a more reliable story. The valuer’s job is to identify that pattern and apply it to the specific characteristics of the subject property — not to anchor a figure on the most flattering data point available.
A practical note.
If you are reviewing a commercial valuation (whether as an auditor, a trustee, or an adviser) it is entirely reasonable to ask the valuer to identify the comparable evidence they have used and to explain why they have selected the yield they have. A valuer who cannot answer those questions clearly has not done the work. A valuer who can is giving you something worth relying on.
Yields are moving. The evidence needs to move with them.
James
Berlin.
Director · Commercial, rating & rent review
James is a director of Taylor Berlin and has practised in commercial property, rating and rent review for over twenty years. The practice advises investors, accountants and pension trustees on commercial and mixed-use valuation across London and the South East.