The commercial property market in Wales shows mixed results, according to a recent RICS report.
- While industrial property demand sees an increase, the retail sector experiences a decline.
- Investor interest in the Welsh market overall remains negative but shows slight improvement from the previous quarter.
- Expectations for capital values in the next quarter also vary across different property sectors.
- Rental expectations diverge with industrial spaces anticipating growth against declines in retail and office spaces.
The Royal Institution of Chartered Surveyors (RICS) released new insights on Wales’ commercial property market, revealing varied performance across different sectors. Despite an overall stagnant demand for commercial properties, industrial spaces have shown a positive trend. There was a notable rise in occupier demand for industrial spaces, registering a net balance of 25%.
Conversely, retail spaces faced challenges, with surveyors reporting a 23% decline in occupier demand. This indicates a growing gap between industrial and retail sectors, reflecting changing market dynamics.
Investor interest in the Welsh commercial real estate market has also shown subtle improvement. Although the net balance indicates a decrease in overall investor demand, it has slightly improved from the previous quarter, moving from a net balance of minus 19% to minus eight.
Breaking it down, industrial spaces again came out on top with 12% of respondents noting an increase in investor enquiries. Meanwhile, office spaces and retail sectors continue to struggle, yet, their declines are less severe compared to the last quarter, marking a slight recovery.
In terms of capital values, expectations over a three-month period signal a mixed outlook. While an overall net balance still suggests a decline, industrial property values are anticipated to rise, with 13% of respondents optimistic about their growth. In contrast, expectations for retail and office space remain negative with net balances at minus 33% and minus eight respectively.
On the rental front, opinions are similarly divided. A significant proportion of surveyors expect industrial rents to increase, with a net balance of 25%. However, rents for retail and office spaces are foreseen to drop, revealing a challenging environment for these sectors. Notably, the rental outlook for the next 12 months seems more promising, with 9% of all respondents projecting an increase across sectors.
Professional insight from Chris Sutton of Sutton Consulting highlights an extended summer lull in transactions, attributed to election effects and pre-budget transaction completions. He points out the strength of the industrial sector, particularly along the M4 corridor, and contrasts the demand for quality office spaces against the difficulties faced by lower-grade properties.
RICS senior economist Tarrant Parsons provides a broader UK perspective, emphasizing the potential for an upswing fueled by a more favorable lending environment. This could support investment in commercial real estate, hinting at modest growth in capital values and rental expectations over the coming year.
The RICS report highlights a complex landscape for Wales’ commercial property market, with industrial spaces leading and retail lagging.
