Demand for commercial property plummets in the South East as Brexit approaches

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Demand for commercial property plummets in the South East as Brexit approaches.
Demand for commercial property plummets in the South East as Brexit approaches.

Demand for commercial property in the South East is taking a downturn in the lead up to Brexit, according to the world’s leading professional body for property.

The Royal Institution of Chartered Surveyors reached the conclusion following the 2019 Q2 UK Commercial Market Survey which found that the commercial property industry-notably the retail sector- is facing a sharp decline.

In total 64% of the region’s commercial property agents reported a fall in the demand for retail premises in the South East during the second quarter of the year, with the effect being a rise in vacant retail outlets described by 55% of the agents.

The need for office space is also said to have decreased by 17%.

David Martin FRICS of Brighton-based property business Stiles Harold Williams said: “Brexit or the lack of a decision on Brexit is impacting the decision-making process, particularly for SMES. Industrial and office remain strong but retail is proving challenging.”

Equally, retail rents are expected to fall over the next three months according to 58% of the survey’s respondents. Meanwhile 20% anticipate industrial rents to rise and office rents to remain flat.                  

And over the next twelve months, prime and secondary retail rents are expected to fall by 3.3% and 4.5% respectively, whilst prime office rents are predicted to rise by 1.9% and remain flat for secondary industrial.

Iain Steele of Surrey-based commercial property agents, Park Steele said: “Small independent retailers continue to acquire the right level of rent. Landlords willing to collaborate with independent tenants will secure lettings.

“The local office market is steady with good demand for freeholds, while the industrial market continues to perform best, particularly freeholds.”

In terms of investor demand; fewer respondents reported a fall in the number of enquiries from overseas investors for industrial space during Q2, 2019, but demand from foreign investors for retail space and offices continues to fall.

Further solid growth in capital values across the prime industrial and office sectors is also expected throughout the next year, meanwhile retail capital value projections remain highly negative.

Across the market, 53% of respondents feel the South East market is in some stage of a downturn. The percentage of contributors taking this view is slightly higher in London, at 63%.

RICS Economist, Tarrant Parsons said: “The overall picture remains little changed across the UK Commercial Property Market in Q2, with the disparity between a strong backdrop for the industrial sector and weakness in retail still very evident.

“While expectations continue to point to solid rental and capital value growth in the former, further declines are expected in the latter.

“Brexit uncertainty also remains a notable headwind, causing caution across both occupiers and investors while they await clarity on the UK’s future trading relationship with the EU.”

For more information about the survey log on to rics.org.

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