Rising demand for commercial property
DEMAND for commercial property in the North West is rising with investors seeing it as a safe haven as rents and capital values look set to continue rising, says the latest Commercial Property Market Survey by RICS (Royal Institution of Chartered Surveyors).
The quarterly survey reveals the industrial sector in the North West has the greatest momentum in occupier demand.
Some 46% more chartered surveyors in the region reporting a rise in demand for industrial space during the months of October to December 2015.
Demand for offices also climbed during Q4 2015 with 37% of respondents seeing a rise in demand for such property.
Retail space was the only commercial property type in the region to see a decline in demand in the final quarter of 2015, with only 19% of North West chartered surveyors reporting an increase in demand for offices, down from 26% in Q3.
Despite rising demand for various types of commercial property across the North West, supply has continued to fall, with the survey recording a drop in available space across all sectors.
Development in the region has only increased marginally with anecdotal evidence suggesting that there is a lack of commercial construction activity in many areas of the North West. RICS has previously reported that the deepening skills crisis is playing a key role in inhibiting development across all areas of the UK.
Looking further forward, 47% of respondents in the North West said they expect to see rents rise across all sectors of commercial property over the next 12 months. Respondents are most confident of seeing rental increases in the prime industrial market with 73% foreseeing a rise as opposed to a fall.
In another ongoing theme, and potentially putting pressure on smaller businesses or start-ups, is the lack of incentives available to rent commercial property.
Incentive packages – such as offering a discounted rent rate for a small time period – on offer from landlords to tenants fell across each sector in Q4 2015, a trend in place for much of the past two years.
Andrew Taylorson of Eckersley Commercial Property Solutions in Lancashire said: “Market conditions remain relatively stable across the board.
“Small free hold city centre secondary offices have proved popular, and the permitted development rights for conversion to residential has led to a number of transactions.
“Market demand for industrial premises remains strong due to a shortage in supply for both freehold and leasehold premises, but secondary and tertiary retail markets remain volatile.
“Investment yields remain firm, due again to a shortage of stock with strong private investor demand evident.”
RICS chief economist Simon Rubinsohn added: “For the time being the real estate sector seems largely insulated from the turmoil affecting financial markets.
“The prospect of a ‘low for longer’ interest rate environment provides further comfort for those parts of the property market where values are looking a little stretched and arguably more vulnerable to a material shift in monetary policy.
“One potential consequence of the current climate is that the trend in foreign investment could slow which is a pattern the latest RICS survey seems to be picking up.
“However, with the economy still set to post growth in excess of 2% in 2016, the backdrop for the occupier market appears reasonably well underpinned.”
