How was 2018 for commercial property?
It’s been an interesting year for the commercial property market; with some sectors enjoying unprecedented interest from investors and renters, and others feeling the impact of Brexit uncertainties.
With 2018 drawing to a close, here’s a round-up of how the UK commercial property market performed throughout the year.
2018 – The First Quarter
At the start of the year, the highest performing sector was industrial – a trend that has continued from 2017. Industrial premises remained in serious demand; and in many locations, supply simply couldn’t match requirements.
The retail sector was down to its lowest levels of take-up since 2012, and experts suggest there are several factors to blame for this; with the main issue being the rise of online retailers. Ironically, it’s this switch to online purchasing that is partially responsible for driving up interest in industrial premises.
April to July
For the second quarter of the year, the UK experienced much of the same. Increasing numbers of companies were investing in or renting industrial space, while the UK’s high streets were suffering from a slight dip in interest. Overall, average commercial property prime yield was consistent though, with levels at 4.56% in July, which matched October 2017’s.
The Third Quarter
Demand for office space continued to be stable in the third quarter – in fact, throughout the year, it remained largely unchanged. Once again, retail suffered somewhat; though the Chancellor’s Autumn Budget sought to address this issue with additional funding for local councils to enhance their retail zones.
Businesses continued to seek out industrial space, and as before, availability of these types of premises are limited.
The London Market
The commercial property market in London has proven to be resilient throughout 2018, with plenty of interest from overseas investors, not to mention lots of take-up by specific business sectors (such as digital industries).
In terms of investment, transaction volumes continue to be high, though have stabilised slightly since 2017. Continued regeneration in the capital, combined with the plentiful supply of new or redeveloped office / retail space, suggests that interest will continue to be elevated for the rest of 2018 and beyond.
And the Future?
With Brexit negotiations soon to be finalised, it looks likely that a level of certainty will return to the market within the next few months. The commercial property market will need to consider how it can meet the ongoing demand for industrial space across the UK; as this looks likely to continue for the foreseeable future.
The retail sector is likely to shift to adapt to the changing needs of the consumer, which will inevitably have impact. With the adoption of technology into ‘bricks and mortar’ stores, this may result in the upturn that the retail property market requires.
However, it’s been a strong year for the commercial property market in most areas of the UK, and most experts agree that this looks likely to continue into 2019. This is especially the case if interest from overseas investors continues to be high, as this resulted in some record-breaking sales recently.