After analysing the first quarter, the outlook for the commercial real estate sector is mixed but there is optimism about property supply and an increase in demand is predicted for the sector in the near future.
NAEA Propertymark commercial members were asked to comment on the levels of demand and supply within the sector over the next 12 months, with 50 per cent anticipating an increase in supply and around a third predicting a corresponding increase in demand.
Property agent membership organisation PropertyMark says its latest Q1 2024 commercial outlook contains a range of figures that paint a mixed picture about the sector's immediate future.
In the office sector, 40% expected supply to increase, while 80% expected demand to decrease or remain stable.
Nathan Emerson, CEO of Propertymark, said:
“Member sentiment varies by sector, with the Land & Landscape and Industrial sectors showing particularly positive attitudes.
“Demand and supply imbalances remain and the pub and restaurant sector in particular continues to be affected by changing trends. However, as the economy stabilises, we remain optimistic about the outlook for the UK commercial property sector.”
In the takeaway sector, 27% of members surveyed expect an increase in both demand and supply, but in the industrial sector, 50% of members expect a surge in demand and 25% expect an increase in supply.
In terms of capital values, the organisation said sentiment in the land, garden and industrial sectors was positive, but the outlook was much darker in the pubs and restaurants sector, with sentiment declining further since the previous quarter.
The industrial, land and yard sectors maintain a similarly positive view on rental levels. However, the office and takeaway sectors maintain a negative view on rental levels.
Meanwhile, 58% of members reported that their rent is increasing following their rent review in the first quarter of 2024. Only 16% said their rent is decreasing as a result of their rent review.
Commerce Advisory Board member Michael Sears commented:
“Demand for city centre retail is still mainly coming from local businesses, but there are some encouraging signs that brands are starting to step up activity. Demand for larger open-plan offices remains low, but demand for smaller offices in business centres is picking up again.”
“Government proposals for inner-city rental auctions will be on the market from September, but the details of how this will work will be crucial – we need to avoid the unintended consequence of lowering prices and rents, and ultimately investment and redevelopment in inner-city areas.”
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