Investor and occupier demand up in Q3

Credit: Paul Matthew Photography

Investor and occupier demand edged up during Q3 in the East Midlands’ commercial sector, according to the Q3 2017 RICS UK Commercial Property Market Survey, despite marked differences in sector performance

During the period, RICS says investment demand for commercial property continued to pick up across the region, with 11% more respondents seeing an increase (rather than decline) in investment enquiries. Demand growth was strongest in the industrial sector, and weakest across retail, according to the figures.

As domestic interest increases, interest from foreign investors also rose across all sectors of the market during Q3. Alongside this, RICS is reporting strong growth across industrial assets, a relatively strong rise in office prices, and little change for values across the retail sector.

Occupier demand in the quarter held steady at the headline level. Looking at individual sectors, demand has increased strongly for industrial space (net balance +32%) and stabilised in the office sector, having fallen in Q2. Meanwhile, demand continued to fall for the second consecutive quarter in the retail sector.

Landlords appear to be getting wise on the back of sluggish demand in the East Midlands office sector, as landlord incentive packages on offer to tenants have now reportedly risen in five successive periods. Retail inducements also picked up – for the sixth quarter running. In contrast, incentives continued to decline in the industrial sector.

It’s hardly surprising, then, that near-term rent expectations indicate firm growth in the industrial sector, a broadly flat picture for office rents, and a marginally negative one for retail at the regional level.

Looking further afield, over the year ahead, RICS says rental expectations are positive for both prime and secondary industrial space, prime offices and to a lesser extent prime retail space. The outlook for secondary office space remains flat. Conversely, the year ahead rental expectations for secondary retail are firmly negative, with rents still anticipated to decline.