The RICS Commercial Property Market survey for Q4 of 2019 has now been published and shows a reasonably steady market with occupier and investment demand continuing to rise. Not surprisingly the retail sector continues to underperform and growth expectations are negative; in fact retail is the only commercial sector to show an outright decline.
The survey shows a generally stronger outlook, no doubt buoyed by the certainty delivered by the December General Election. Prime office rents are anticipated to rise by 2.5%, with a flatter outlook on secondary space. Tenant demand in the industrial sector increased whilst supply fell back a little.
Retail is the poor relation with no let-up in the ongoing downturn and continuing reductions in tenant demand. Retail rental growth is expected to be negative for the next twelve months. Retail vacancies are cited to be rising sharply, a pattern which started in 2017; changes in shopping habits are no doubt a key driver. Whilst there is expected to be a decline in all retail, the decline in prime will be less severe.
Investor enquiries in general fell over the last quarter, again mainly due to the retail sector, although with slightly less demand for office stock. In the next twelve months both office and industrial properties are expected to grow in value, with retail values falling.
The nature of the market has given a mixed picture of results and there is some sense of a downturn looming.
For those of us in the north west, agents report good general demand and some decent instructions. The Oakwood view is that the lower end is more active due to investors moving from residential property due to the tax and compliance issues which are in place, making this a less attractive area for investment. We are also seeing that whilst retail in general is suffering, there remains good activity for small shop units in out of town locations. Convenience stores, hairdressers, takeaways, etc. which serve a local market, often located within housing estates, can be good investments.
As to the figure, we still await detailed plans on Brexit and can only guess the impact this will eventually have on the property market; for now, though, there is a calm stability in the office and industrial markets with declining retails fortunes.
A G Bowcock MRICS
