SW commercial property in demand

Demand from business for commercial property in the South West rose for the eleventh consecutive quarter, while available space in the region fell for the ninth successive period, according to the latest RICS Commercial Market Survey.

As a result, rents are expected to rise at the fastest pace in the South region as a whole since the survey began in 1998 with 44% more respondents forecasting higher, rather than lower, rent rates going forward. Industrials are the segment of the market in the South West where rental expectations are currently most buoyant, while retail in the South West continues to lag - although even in this area, momentum is picking up.

The picture is not dissimilar in the investment market in the South West with 39% more surveyors reporting an increase in prospective investors in the region over the quarter. There were also reports of greater overseas buyer interest across the UK, with 36% more respondents seeing more enquiries from overseas investors.  Meanwhile, availability in the South West continues to decline, exerting further upward pressure on capital values.  22% more chartered surveyors reported a fall rather than rise in availability with the decline in availability most marked in Office space.

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.

Interestingly, given the upcoming referendum, when asked if Britain leaving the EU would have significant negative implications for the commercial property market, 44% of respondents across the UK felt it would, while 32% believed it would not. Reflecting the high degree of uncertainty, 24% reported they did not know at this point.

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."