Saturday, February 24, 2024

Store, office vacancies surge amid pandemic


However, warehouses were the exception, with more brokers reporting an increase in demand

Store and office vacancies are surging across the UK as the pandemic hammers retailers and workers stay at home.

The amount of empty space in the UK’s malls and stores is rising at the fastest pace since at least 1999, when records began, according to a survey of brokers conducted by the Royal Institution of Chartered Surveyors. The number of brokers reporting higher office vacancy rates was the highest since the depths of the last financial crisis.

UK retail landlords were already grappling with falling rents and values before lockdowns accelerated the shift to online shopping and forced more stores to close. The pandemic has also dented the outlook for office landlords as companies grapple with the economic fallout of the virus and question the need for staff to come in to work every day.

Warehouses were the bright spot in the survey, with more brokers reporting an increase in demand and forecasting rents will rise. The world’s biggest real estate investors including Blackstone Group Inc have been investing heavily in warehouses, betting the growth in e-commerce will underpin strong demand for distribution space.

Both the office and retail sectors continue to see occupier and investor demand diminish, with expectations for rents and capital values remaining deeply negative for the time being, RICS economist Tarrant Parsons said in a statement Thursday. The industrial sector seems to go from strength to strength.

Workspace Group Plc, a London-based serviced-office operator, said Thursday that about 18% of its properties were empty at the end of 2020, up from about 10% at the end of June, reflecting the impact of customers that gave notice of their intention to vacate earlier in the year coming to the end of their contracts.

By contrast, Tritax Big Box REIT Plc, a warehouse landlord, said Thursday that the value of its portfolio had grown by 8% since June after the UK witnessed record demand for logistics real estate space.

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