Commercial property demand up in UK as supply falls

InternalDemand from business for commercial property in the UK rose for the eleventh consecutive quarter, while available space fell for the ninth successive period, the latest sector market survey report shows.

The Royal Institution of Chartered Surveyors (RICS) says that as a result, rents are expected to rise at the fastest pace since its survey began in 1998 with 46% more respondents forecasting higher, rather than lower, rent rates going forward.

Offices remain the segment of the market where rental expectations remain most buoyant, while retail continues to lag although even in this area, momentum is picking up, while prices are expected to keep rising over the next 12 months.

The picture is not dissimilar in the investment market, where purchase enquiries rose again; 53% more surveyors reported an increase in prospective investors over the quarter.

Meanwhile, availability continues to decline, exerting further upward pressure on capital values. There were also reports of greater overseas buyer interest, with 36% more respondents seeing more enquiries from overseas investors.

Across the whole of the UK, but excluding London, 95% of respondents believe that current commercial market valuations are either at or below fair value, this is roughly unchanged since the first quarter of 2015. However, in London 50% of contributors now feel that commercial property valuations are ‘expensive’, an increase from 45% in the first quarter.

RICS says it was interesting that given the upcoming referendum on the UK’s position in the European Union, when asked if Britain leaving the EU would have significant negative implications for the commercial property market, 44% of respondents felt it would, while 32% believed it would not. Reflecting the high degree of uncertainty, 24% reported they did not know at this point.

‘The results of the latest survey suggest the price of commercial real estate will continue to move higher over the next 12 months and quite possibly by another 10%,’ said Simon Rubinsohn, RICS chief economist .

‘Fortunately, the strength of the occupier market is providing some underlying support for the market. Indeed, the feedback we are getting from around the country tells us that the economic expansion is continuing to broaden out with both tenant demand, and just as significantly, investor interest, rising in all areas,’ he added.

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Warning sounded as the commercial property market struggles to keep up with demand

JS12991379The market has really started to motor along, evidenced by a very much higher volume of enquiries now being received. We saw a doubling of enquiry numbers between 2013 & 2014 and enquiries are on course to double again in 2015.

Enquiries Struggling
We have a number of enquiries that are really struggling to find commercial property to suit their needs. Demand is such that there is now a serious shortage of stock on the market, particularly on a freehold basis. This makes searching for a new premises an even more time consuming exercise when most business owners and decision makers would prefer to devote time to the business, not the irritating diversion of looking for new premises.
This is where turning to Wiggins Lockett Thompson can make sense. We offer a search and acquisition service to take the leg work away from our client, leaving them to the day to day running of their business. Our Surveyors take a personal approach to business and keep our clients updated along the way. We utilise our years of experience and market contacts to dig out the opportunities for our clients to consider.

Corporate Support Service
WLT offer an all-round package of commercial services and advice in-house. Our Corporate Support Services are utilised by clients across the region from the full all-encompassing service to bespoke services relating to specific matters.  We provide what essentially amounts to a Property Director role in companies that need them.  Expertise is available as and when needed with “property updates” provided to client keeping them ahead of the trends, important dates and responsibilities.  This is vital information for company boards and business owners.

The Current Situation
The lack of available properties on the market of course means that, marketed properly, a relatively short marketing period is required. We have current live enquiries for industrial premises from 1,000 sq ft to 20,000 sq ft and are therefore very keen to talk to property owners across the Black Country.  The situation is such that commercial leases are being re-geared and renegotiated mid-term.
Recent transactions we’ve been involved in include the freehold industrial acquisition of 57,000 sq ft in Dudley, letting of office space in Stourbridge, Wolverhampton and Gailey.  Solicitors are being kept very busy and on their toes.
Clients of Wiggins Lockett Thompson, Denby Developments commented,
“I have been thoroughly impressed with the level of service Richard and the team have provided to us from initial marketing through to negotiations and completion.