Demand for office space surges in second quarter

THE strong demand for commercial property in the North West continued into the second quarter but available office, retail and industrial space remained in sparse supply.

According to the latest RICS Commercial Property Market Survey, 40% of chartered surveyors in the North West reported an increase in demand for office space – up from 38% during the first quarter of the year, while 46% saw a rise in demand for industrial property, a slight decline from 48% in quarter one.

Meanwhile, demand for retail space fell slightly, with 28% more respondents reporting an increase in enquiries – down from 32% in Q1.

Chartered surveyors in the North West reported an increase in retail development starts across the region, but the survey revealed a lack of new industrial sites and new office developments.

Across the whole of the UK, but excluding the capital, 95% of respondents believe that current commercial market valuations are either at or below fair value (roughly unchanged since Q1 2015). However, in London 50% of contributors now feel that commercial property valuations are ‘expensive’ – an increase from 45% in Q1.

In the investment market, enquiries rose again with 55% more surveyors in the North West reporting an increase in prospective investors – some of which were from overseas.

As availability of commercial property continued to decline across the region, the tighter market conditions resulted in rental expectations edging upwards, with 34% more respondents in the North West expecting rents to rise over the coming three months.

Paul Marshall of Bolton Marshall in Rochdale said: “The market in the north east quadrant of Greater Manchester is showing signs of continuing recovery, particularly in the industrial sector. A shortage of good quality space coming onto the market is resulting in an upward movement in price levels, in such towns as Rochdale, Oldham and Bury. The office sector in these areas does, however, remain relatively depressed due to limited demand.”

Charles Fifield of Fifield Glyn in Cheshire added: “There seems to have been an increase in demand for secondary retail space and offices. Interestingly flexible lease terms are still being requested but mainly now from potential tenants feeling they need the possibility to expand their business.”

Simon Rubinsohn, RICS chief economist, commented: “The results of the latest survey suggest the price of commercial real estate will continue to move higher over the next twelve months and quite possibly by another ten per cent. 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.”