Commercial property supply shrinking fast - Palmers Solicitors

Commercial property supply shrinking fast

The nationwide availability of commercial property is declining at its fastest rate since 1998, according to the Royal Institution of Chartered Surveyors (RICS).

RICS’ UK Commercial Market Survey for Q2 2014, published on 29 July, reported that overall availability of commercial property fell at its fastest rate since the survey began in 16 years ago, with sharp declines in office and industrial space availability.

One contributory factor was an increase in the number of commercial properties being sold with permitted development rights (PDR) to be converted into residential properties.

UK-wide, a net balance of 49 per cent of respondents said this activity was having a moderate impact on commercial market activity. Almost one in five (a net balance of 18 per cent) said it was having a substantial impact, although this figure rose to 32 per cent in the south.

In London and the south particularly, respondents reported that growing demand and the resulting drop in yields was encouraging investors to look for opportunities beyond prime locations.

Expectations for rent levels over the course of 2014 revealed that 33 per cent more surveyors are expecting rent levels to increase throughout the year. Respondents forecast that rents would rise by 5.5 per cent in the industrial sector, 4.3 per cent in the offices sector and 2.8 per cent across retail space.

Simon Rubinsohn, chief economist at RICS, said: “The latest results provide clear evidence that the economic recovery is broadening out across the country with rising employment increasing the demand for space in all sectors of the market. As a result, the balance of power is now shifting back to landlords with rent expectations turning increasingly positive.

“Meanwhile, the pressure in the office sector is being exacerbated particularly in popular locations by the gradual conversion of some secondary space into residential. While making a much needed contribution to the substantial shortfall of homes, there are understandable concerns that this could be creating a related problem for businesses looking expand their footprint as economic confidence grows.”

In a buoyant commercial property market, access to expert legal advice can be crucial in a fast-moving environment where tight deadlines and substantial sums of money are often involved.

Palmers offers a comprehensive range of services for commercial property owners and developers, including advice on office, retail and industrial development, commercial property contracts, and negotiating local authority and utility agreements. For more information, please contact Carey Jacobs.