West Midlands bucks UK trend on commercial property demand
The West Midlands commercial property market is continuing to improve on last year’s subdued climate, with industrial space outperforming both office and retail, according to a new report.
The Q1 2017 RICS UK Commercial Property Market Survey concludes investor demand is increasing across all regional commercial property sectors.
The property organisation said 7% more respondents had reported a pick-up in enquiries, with industrial assets being the most sought after assets in Q1.
In the West Midlands, 17% more respondents saw an increase in demand for industrial space.
Overseas investment demand also grew across the industrial sector in Q1.
However, the picture was different for office and retail space; both seeing falls on the previous quarter.
The industrial sector also continued to perform strongly in terms of capital value expectations with 22% more respondents anticipating prices to rise over the next three months.
Demand from tenants for commercial property increased again, with 25% more respondents seeing an increase. Demand has continued to rise since Q3 2012.
Industrial and office space are the strong performers in the West Midlands commercial market at present with 32% and 33% more respondents, respectively, seeing a rise in demand. Despite the majority of UK seeing a fall in demand for retail space, West Midlands retail continues to report rises despite being the slow performer of the region (a net balance of +10%).
Consequently, availability across the industrial sector continues to decline, with 45% more respondents noting a fall in industrial space during Q1. The amount of industrial space available has been decreasing continuously since Q1 2013. Space available for occupancy in the retail sector, also remains flat.
Given the demand and supply dynamics, rents are expected see the strongest growth in the industrial sector, both over the next three months, and at the 12-month horizon. At the same time, offices are expected to see only modest growth, while rents are anticipated to remain flat in the West Midland’s retail sector.
Geoff White, RICS Policy Manager, North & Midlands, said: “The shortage of industrial and commercial units is a major issue in the West Midlands and a concern for RICS professionals in the region.
“They have welcomed the government’s intention to develop an industrial strategy across the UK and the focus this will bring to offices, industrial units and commercial sheds. Employment land is being lost to residential schemes to fix the housing shortage, but this means opportunities for businesses to start, grow and relocate are shrinking.
“In addition to this, uncertainty in the economy means much-needed speculative commercial development is extremely rare or non-existent without some form of public sector intervention.”
He said that unless the industrial strategy tackled this, the government’s plans to drive economic growth and improve productivity could be in jeopardy.
“One answer would be to ensure that any future ‘metro mayors’ would have powers to protect employment land and to develop strategic development plans that would bring together the currently disjointed local and national plans for transport infrastructure, housing and industrial and commercial real estate,” he added.