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A surge in investment and tenant demand in the United Kingdom’s commercial sector points towards a stronger economy over the remainder of 2015, according to the latest RICS Commercial Market survey.
Occupier activity is now at its highest level since 1998, highlighting a more broadly balanced economic expansion. Some 45 percent of London respondents believe commercial valuations are ‘above fair’ versus 4 percent across rest of U.K.
Interest from overseas buyers and investors also increased substantially.
Q1 2015 was the 10th consecutive quarterly acceleration of demand for commercial properties in the U.K., with 46 percent more respondents seeing greater interest. Interestingly, this points to stronger increases in employment with this series providing a two to three quarter lead on official jobs data compiled by the Office for National Statistics.
In the investment market, enquiries also increased significantly, with 49 percent more surveyors seeing more prospective investors – continuing the trend of rising demand that began towards the end of 2012. Overseas buyer interest also increased compared with the previous quarter, with 34 percent more respondents seeing more enquiries from overseas investors.
As availability declines (38 percent more surveyors are seeing fewer commercial properties on the market), the impact of these tighter market conditions on rental expectations has resulted in them edging upwards to the highest headline-level reading since 1998. This is particularly apparent across the industrial and office sectors, while retail rental expectations continue to lag behind.
Looking ahead respondents expect, the office sector to perform most strongly with London leading the way despite increasing concerns over the valuation of prime property in the capital. Significantly, there is also increasing confidence that the more upbeat mood will impact on secondary space with rents and capital projections positive in all locations.
Simon Rubinsohn, RICS Chief Economist, said: “The strength of the latest commercial property survey suggests that the underlying momentum of the economy will continue to accelerate through the course of this year.
“What is particularly encouraging is that a better tone to the results is visible in all parts of the country and increasingly in secondary as well as prime space. Given these indicators have historically provided a strong steer as to the performance of the economy two to three quarters out, it is hard not to be encouraged by the conclusions of this report.”
Andrew Batt, International Group Editor of PropertyGuru Group, wrote this story. To contact him about this or other stories email andrew@propertyguru.com.sg
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