Partner Article

A changing landscape, but still a good bet…

These are interesting times in the UK property market, as much in the commercial sector as in residential, hence our clients rely on us to siphon a wealth of market information to assist them in making the right choices when considering commercial property options, whether as a landlord or occupier.

Based on our 2017 market experience and supported by research from the Royal Institution of Chartered Surveyors, we’ve put together a perspective on the 2018 opportunity on a sector by sector basis, which will be of interest to anyone considering a new investment, or a review of an existing property portfolio.

The INDUSTRIAL sector has been the clear outperformer in 2017, both in occupier and investment markets. During 2018, we expect industrial rents and values to continue its upward trajectory, so making it an attractive (if highly competitive) sector.

With prime OFFICE rents showing moderate gains over previous years, this sector continues to be the ‘steady’ investment choice, with some particular nuances:

• Smaller office requirements are being addressed by serviced office providers in the main - the secondary office market remains flat.

• The value of landlord incentive packages has risen over the last 18 months and is likely to increase further during 2018.

• In comparison with other parts of the country, office rents in London are likely to show modest declines from 2017 values in view of market caution.

A long-time darling for commercial investors everywhere, the RETAIL sector now lags significantly behind both office and industrial sectors in terms of rental growth, and in capital value, with the secondary market in particular showing significant declines.

• Expectations for the prime market are being generally downgraded from marginally positive to flat, with the secondary market showing further declines as retail rents come under further downward pressure.

• Recent high profile failures of Toys ‘R’ Us and Maplins continue to reinforce the threat to the high street from online retailers.

The overall net effect across all sectors is that occupier demand is likely to remain flat during 2018.

In our opinion… Investor sentiment in London is likely to continue to buck the trend of occupier caution, as investor activity remains relatively strong.

This was posted in Bdaily's Members' News section by Richard Hutt .