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Due to market uncertainty arguably caused by ‘Brexit’, demand in the UK retail sector fell for three consecutive quarters in 2017, most recently by 22%. According to the Royal Institute of Chartered Surveyors (RICS) this is the lowest reading since 2011, and the retail sector was the only area in the market to see an increase in the availability of leasable space.
Fraser Williams, one of London’s leading Chartered Surveyors, explains; “Many companies have packed their bags and taken their investment cases elsewhere due to Brexit and market uncertainty. Furthermore, the market has become a tenant market rather than a landlord market. The office vacancy rate in the city has risen to an astonishing 8% – 15% including all new developments, and landlords are now giving away huge incentives.”
Against this backdrop, rents for retail space are also expected to decline in the near term, and this picture is predicted to continue over the next twelve months. That said, although rent projections for prime retail space were downgraded from a slightly positive outlook to flat in Q4 2017, the weakness in retail rental values is mostly in secondary retail locations which have slipped further into negative territory.
On a UK-wide basis, headline occupier demand for UK commercial property was flat in Q4 2017, but rising industrial demand is balancing out both the flat office demand and the decline in retail. RICS has also noted a dramatic increase in occupier demand. As industrial continues to outperform, the near-term rental growth in that sector remains very positive compared to retail units and office space.
This news was brought to you by Morgan Pryce, a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.