More than half of region’s surveyors report fall in demand for retail property

Much of the retail sector in Yorkshire and Humber continues to be under pressure, as occupier demand has again fallen and demand for retail premises not expected to pick-up over the coming 12-months.

According to the Q2 2018 Royal Institution of Chartered Surveyors (RICS) UK Commercial Property Market survey, 54% of commercial chartered surveyors in the region saw a fall in demand for retail property over the last four months.

This decline in demand is having an impact on retail stock levels and rent expectations, with 55% of respondents reporting a rise in the availability of retail property over the past four months and 48% anticipating a fall in rents over the next quarter of the year.

Looking ahead over the next 12-months, 43% of contributors do not expect to see rents rise for prime retail property, and 61% do not anticipate seeing rents increase for secondary retail space.

However, the region’s industrial sector is attracting solid demand from occupiers and investors, with 30% of commercial chartered surveyors in the region reporting a rise in demand for industrial space, respectively from both occupiers and investors.

But 30% of contributors also reported a decline in the availability of quality industrial space over the past quarter of the year, and this coupled with healthy demand, is impacting future rent expectations. A total of 37% of respondents are expecting to see industrial rents rise over the coming four months.

Furthermore, over the next 12 months, 66% of contributors expect rents to increase for prime industrial space, whilst 33% anticipate rents for secondary industrial property to rise over the coming year.

Looking at the office market, demand held steady with 20% of commercial chartered surveyors in the region reporting a rise in demand from occupiers over the last quarter, and 13% seeing an increase in enquiries from investors.

Grade A office space is still much sought after, with 40% of contributors expecting to see a rise in rents for prime office space over the next 12-months.

Lastly, looking at the development pipeline over the past four months, few new commercial property schemes got underway in the region, with respondents reporting a fall in the development of new retail premises, whilst a modest 13% saw an increase in the start of new industrial developments, and 4% noted a rise in the development of new offices.

In an additional set of questions included in the latest survey, just over one-third of respondents reported seeing an increase in the usage of Company Voluntary Arrangements (CVAs) over the past year, with around two-thirds anticipating that this will lead to more retailers inserting CVA clauses into contracts going forward.

As such, it is unsurprising that over 70% of contributor’s sense investors will be looking to scale back exposure to the sector.

Simon Rubinsohn, RICS chief economist said: “The challenges being faced by the retail sector not surprisingly come through strongly in our latest survey results, but the counterpoint to this is the ongoing strength of demand for good quality, well located industrial/logistic sites. Indeed, the lack of availability of stock in the industrial segment of the market and the generally sluggish development pipeline, is pointing towards further healthy gains in pricing”.

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