COMMERCIAL PROPERTY UPDATED – MIXED MESSAGES
The Royal Institution of Chartered Surveyors (RICS) have recently published their latest commercial property survey covering quarter 3 of 2019. The survey invites surveyors to provide comments based on their experiences of the market.
The message for Q3 is very mixed, notwithstanding the political uncertainty. Enquiries in respect of offices edged down, whilst retail remains weak. Industrial property continues to perform well, with values anticipated to rise, although expectations have moderated. There is a general feeling that the market is turning down.
The issue of Brexit is being considered by investors and occupiers and resolution to the current impasses may improve demand. The overall decline in demand, however, is driven by retail where there have been massive structural changes to the way in which the sector operates.
The availability of leasable industrial space was largely unchanged, whilst retail vacancies are rising. The amount of available office space grew. Owners of both offices and retail space are offering greater incentive packages to tenants.
Commentators expect industrial rents to rise, although perhaps at a slower rate than they have been, with little change expected to office rents and negative projections for the retail sector.
Investment enquiries fell, including from overseas. Supply of property for sale was relatively unchanged quarter on quarter, as an average, although more retail coming to the market was offset by less office and industrial space. With the exception of retail, commercial property values are expected to hold firm. The retail sector is beset by challenges from the internet and changes in shopping habits generally. Many high profile and long established retailers have entered Company Voluntary Arrangements (CVAs) or stopped trading, putting pressure on landlords to reduce rents.
The North West, where Oakwood operates, is seeing a lack of consistency in the commercial market and investors need to take great care when purchasing property. However, there is a general lack of supply and a shift, at the lower end, of money from residential buy to let over to commercial property, particularly small shops and offices. Yields are definitely firming, assisted by the continuing low interest rates for borrowers and lack of opportunity to invest elsewhere worthwhile.
The current quarter, to the end of the year may well show the same level of uncertainty as Brexit continues to be unresolved and has been kicked in to 2020. There certainly seems to be a pent up demand, so perhaps more certainty with the political climate will see this translated into deal.
Graham Bowcock MRICS