As we move through 2024, the UK commercial property market presents a seemingly optimistic yet complex landscape. The latest insights from the RICS commercial property monitor suggest that the market might be poised for a comeback.
In light of the recent report, Lesley-Ann Riddles, Senior Associate and Commercial Surveyor at specialist property consultancy GFW, draws on her industry expertise to share her insights on current market trends, predicting what the future may hold for the UK commercial property market.
Quality over quantity
“One of the most notable trends observed this past quarter is the sustained interest in the industrial sector, particularly in primary and secondary markets. While the volume of enquiries dipped compared to the same period last year, the quality of leads improved, with a higher conversion rate into actual deals. This trend highlights a shift towards more calculated and strategic investments, with stakeholders prioritising viable, long-term opportunities over speculative ventures.
“In the retail sector, we witnessed an encouraging uptake in the demand for smaller units, particularly in the North East. This aligns with national trends where the retail leasing market is showing signs of growth, driven by a rise in interest for localised, community-centric retail spaces. This resurgence is a positive sign for the broader retail market, suggesting that despite the challenges the sector has faced, there is still potential for growth and improvement.”
Election uncertainty stalls growth
“The general election introduced a level of uncertainty within the commercial property market that caused some investors and occupiers to pause their plans, leading to a dip in investment activities. Additionally, the decision to hold interest rates steady from the previous quarter did little to boost confidence, resulting in a market that remains relatively flat.
“Within the typical commercial sectors, industrial is still outperforming both office and retail spaces regionally, with pressures on the retail sector seeming to have eased slightly.”
Regional variations and emerging opportunities
“Regionally, the North East has experienced a noticeable slowdown, with fewer enquiries across all sectors, reflective of a broader national trend. However, RICS commercial property monitor indicates that a gap seems to be appearing between rising office demand in London, against a subdued picture for the rest of the country.
“Despite a commercial property slowdown, this quarter has also revealed emerging opportunities, particularly within the food and beverage industry, where there is a growing demand for commercial units. Alternative asset classes such as student housing, life sciences, and data centres also continue to show strong capital value and rental growth projections, indicating areas of potential expansion outside of traditional sectors.”
A positive yet cautious outlook
“Looking ahead, there is a cautious optimism for the remainder of 2024. With a new UK government now in place and inflation beginning to cool, the market could see a gradual improvement.
“Rents for both primary and secondary industrial units are expected to rise over the next 12 months, and there is also a positive outlook for prime office spaces, while secondary offices may continue to lag.
“As the industry awaits further clarity on the new government’s approach to planning and business rates, there is a quiet hope that these changes could provide the boost needed to reinvigorate the market. In the meantime, stakeholders will continue to navigate these uncertain waters, seeking out opportunities in the sectors and regions where growth potential remains strong.
“Though uncertainty still lingers in the UK commercial property market, the potential for recovery is becoming increasingly evident. As we move towards 2025, the industry’s resilience and adaptability will be crucial in seizing these opportunities and driving the market forward. As market conditions continue to change, GFW are focussed on providing clients with expert support and informed advice, ensuring they make the most of emerging opportunities.”
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