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General
Demand for commercial property accelerated at the fastest pace in seven years, boosted by a strong economy and record profitability, says the Royal Institution of Chartered Surveyors (RICS) Wales, latest commercial property survey.
Wales reported one of the biggest rises in new office development, with the pace of growth more than doubling over the last twelve months. Similarly demand for industrial property increased for the second consecutive quarter across the UK, although in Wales demand may be starting to stabilise. Yet despite this, surveyor confidence in the outlook for industrial demand is markedly higher than this time last year.
However, for retail property the outlook in Wales is less positive, with lack of demand leading to available property continuing to rise despite strong high street trading. Overall, surveyors in Wales are not optimistic about the outlook for the next quarter, in contrast to surveyors across the UK.
In the rest of the UK, business demand for commercial property picked up at the fastest pace in seven years with the retail sector no longer acting as a drag on overall demand. All sectors improved for the first time in two years as 16% more chartered surveyors reported a rise than a fall in overall demand compared to 7% in the last quarter. In fact, demand has broadened out across all regions with the central London market no longer the stand-alone performer.
Demand in the office market accelerated in Q1 with the pace of expansion doubling to an all time survey high, 35% more chartered surveyors reported a rise than a fall in demand in the office market, up
The retail and industrial markets continued to show improvement with surveyors reporting that demand in the retail market has stabilised for the first time in two years. Greater pricing power and firm high street sales have offset the impact of a strong pound and interest rate hikes on the retail and industrial sectors.
Surveyor confidence was optimistic across all sectors for the first time in two years but confidence in rental growth dampened in the central London retail market following an increase in supply.
Cathy McLean, director of RICS Wales said: “A Strong economy and increasing profits in Wales have encouraged businesses to continue to seek out commercial premises in Wales. Fears that commercial property investment would ease back have been unfounded with increased building of commercial properties. Despite interest rate hikes and a strong pound, high street sales have held their own even with increasing pressure on the retail sector – although this hasn’t been translated into demand for retail space.
It will be interesting to see how the newly unveiled code of commercial leases will affect the commercial property sector – by offering increased clarity of landlord and tenants rights and responsibilities, businesses may be more willing to enter commercial leases. This may prove the lack of optimism for the next quarter’s outlook to be unfounded.”
