The commercial property market in Yorkshire and the Humber is feeling the effects of the uncertainty surrounding Brexit negotiations.
The region has seen tenant demand for offices, retail space and industrial property fall throughout the last quarter, according to the Q3 2018 RICS UK Commercial Property Market survey.
Due to the continued uncertainty, RICS (Royal Institution of Chartered Surveyors) is calling on the government to review the business rates system in the upcoming Budget.
Respondents to the quarterly survey said that occupier demand for offices in the region fell during the last quarter of the year (Q3) with 18% more respondents reporting a rise in tenant demand for office space (down from 38% in Q2), whilst 41% reported an increase in demand for industrial space (down from 46% in Q2) and 41% saw a decline in occupier demand for retail property.
This is most likely because the retail sector is struggling amid the tough market conditions and the boom of online retailers.
Respondents also reported a lack of available office space and industrial property in the region, but 32% saw a rise in the availability of retail space during Q3, prompting landlords to continue to offer incentive packages.
To help provide a boost for the High Street and the wider commercial property market, RICS is calling on the government to review the business rates system in the upcoming Budget.
Hew Edgar, head of policy at RICS, said: “People want a vibrant high street at the heart of their community. Yet the combination of Brexit uncertainty and competition from online retailers mean small independent businesses, in particular are finding it harder to stay afloat.
“That’s why we are calling on the government to use the Budget to review business rates, with the aim of improving the whole system and help provide a shot in the arm for our ailing high streets.”
Looking at investments, all commercial property types – except the struggling retail sector – saw a rise in enquiries from potential investors with 55% of respondents reporting an increase in investment enquires for industrial space, and 30% seeing a rise in enquiries from investors for office property.
Looking ahead, the lack of available office space and industrial property in the region is predicted to impact rents over the next three months – across both these sectors – with 25% of respondents expecting office rents to increase (up from 21% in Q2), whilst 35% of respondents expect rents to rise for industrial property (up from 27% in Q2). Retail rents are not predicted to rise over the coming three months.
In each quarter since the Brexit vote took place, survey participants have been asked if they have seen any evidence of firms looking to relocate at least some part of their business as a result. Throughout much of this time, the proportion reporting they had seen signs of this type of activity remained at around 15-18%. Interestingly, however, this picked up to 25% in the latest results.
Tarrant Parsons, RICS economist, said: “The commercial real estate market continues to be characterised by a stark contrast between the struggling retail sector and the strong performance of industrial property.
“Trends are a little more mixed in the office market, depending on which part of the country you look at, but the overall picture remains broadly steady. The uncertainty engendered by the ongoing Brexit process now appears to be having a greater bearing on tenant decisions when it comes to taking up commercial space, with a lack of clarity regarding the final trading relationship causing some hesitancy.
“That said, investment activity remains reasonably solid, as the latest results point to a stable quarterly trend in demand and a continued decline in supply.”
Source: The Business Desk