Retail demand is stronger in London compared to other regions, while industrial property demand continues to be positive across most areas
The UK commercial property market has seen modest gains in the first quarter of 2024, despite ongoing challenges, according to the latest survey from the RICS.
Tenant demand rose by 4% in the first quarter, up from a -7% net balance at the end of 2023, with industrial sectors showing the most robust growth since the third quarter of 2022 at a net balance of +14%. Office spaces also saw a rise in demand, the first since early 2022.
Nevertheless, demand for tenant spaces is becoming more regionally divided. In London, office demand surged this quarter from +3% to +40%, while in other parts of the UK, demand remained static or marginally dropped.
Retail demand is stronger in London compared to other regions, while industrial property demand continues to be positive across most areas.
Although sentiment remains comparatively cautious regarding the near-term outlook across the UK commercial property market, the latest survey results do show some signs of recovery coming through, according to Tarrant Parsons, RICS senior economist. For one, occupier demand growth now seems to be gaining traction slightly, supported by the wider economy seemingly returning to growth after a brief recession late last year.
He added: Moreover, the prospect of interest rate reductions later this year have already led to an easing in credit conditions across the sector, marking the first such improvement in our feedback since 2021. This should begin to support investment market activity as the year wears on, which, in turn, will likely see a more stable picture emerge for headline capital values.
The survey also found that 89% of respondents are witnessing repurposing of office spaces for other uses, and 52% observed a rise in clients reducing their office space needs over the past year.
