Q2 Commercial Market Update
Quarter two has brought some interesting developments in the commercial property market across various sectors. Our commercial department has observed the evolving trends and would like to share their insights with you.
In the office market, we are witnessing a two-tier dynamic. While the number of workers returning to offices is on the rise, the shift in working practices continues to impact demand. Top-quality offices remain highly sought-after, commanding premium prices. However, secondary office spaces are slower to move, primarily due to concerns about the cost of retrofitting to improve Energy Performance Certificate (EPC) ratings. Despite increased investment levels since Q1, yields have softened.
The industrial sector experienced repricing in the second half of the previous year, but a stabilisation in yields has been observed in Q1. Rents continue to rise due to tight supply. Although rising supply, higher rateable values, and increased energy costs may affect rental growth, it is expected to remain positive, particularly for high-specification units. Investment activity is picking up, with investors seeking value where market values may have overcorrected.
In the retail sector, footfall has seen a gradual increase since the pandemic, but it has yet to reach pre-pandemic levels. Consumer confidence has improved, although inflation data poses a challenge. Retail yields have already factored in the increased risks, resulting in minimal impact on capital values. Out of Town retail spaces have shown greater resilience. Tight supply and alternative uses have led to declining vacancy rates, creating more stable rents.
Development in the commercial property market has been influenced by proposed rules on higher EPC ratings. Landlords and developers are increasingly considering change(s) of use and other asset management initiatives to increase income returns. Retrofitting costs are a key concern, leading to a focus on alternative uses.
As we move forward, these market trends will continue to shape the commercial property landscape. It is crucial for investors, developers, and landlords to adapt to the changing demands and seek opportunities in high-value assets, emerging sectors, and innovative asset management strategies.
Have you got a commercial property to sell or let or are you looking to buy or rent? Speak to our team today > 01903 201 212