Retail occupier appetite nosedives in ‘downturn’
Retail occupier demand plummeted by 58% during Q4, according to RICS’ latest UK commercial property market survey.
Demand for office space declined by 9% during the same three months.
On the other hand, 21% of respondents saw an increase in occupier demand for industrial space, bringing all-sector tenant demand to -13%. The total was down from 9% recorded in the previous quarter.
Retail occupier demand plummeted by 58% during Q4, according to RICS’ latest UK commercial property market survey.
Demand for office space declined by 9% during the same three months.
On the other hand, 21% of respondents saw an increase in occupier demand for industrial space, bringing all-sector tenant demand to -13%. The total was down from 9% recorded in the previous quarter.
Meanwhile investor enquiries also fell across retail, with RICS estimating it fell at the sharpest quarterly pace, in net balance terms, since 2008.
Vacant retail space rocketed by 46% during the quarter, at one of the highest levels seen since 2009.
RICS said industrial supply dipped lower for the 26th consecutive quarter. However, vacant space in the office sector stayed relatively stable.
In general, respondents trimmed their expectations for rental growth in commercial property in the near term at the headline level.
The net balance fell by 7%, compared with a decline of 2% in Q3 – the weakest seen since the referendum.
The findings also showed a “noticeable” uptick in respondents perceiving the market at “some stage of a downturn”.
At a national level, 41% of respondents said they viewed the market as being in the early stages of decline.
In London and the South East a respective 71% and 69% of contributors said they sensed the market was in the early to middle stages of a downturn.
In the case of the latter, this is up from 53% in Q3, although London displayed a similarly high proportion of respondents taking this view six months ago.
Tarrant Parsons, economist at RICS, said: “The latest feedback suggests that the lack of clarity over the Brexit process remains a key factor weighing on the commercial property market, with potential occupiers adopting a wait-and-see approach before committing.
“This comes in addition to the ongoing structural changes, which continue to take their toll on the retail sector, evidenced by the further rise in vacant space shown in Q4.
“On the flipside, the industrial sector, which is a clear beneficiary of the shift towards online shopping, continues to attract solid demand growth from both investors and occupiers across all parts of the UK.”
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