Demand for retail space fell again in the last quarter as economic uncertainty continues to depress the market. The Royal Institution of Chartered Surveyors (RICS) UK Commercial Market Survey, which was released on Friday, shows that take-up of high street premises has now fallen for five consecutive quarters.
The three months up to and including September saw an 18 per cent fall in demand coupled with a further rise in the number of unoccupied retail properties. Consequently this has resulted in a continued fall in rental expectations which are down by 28 per cent.
RICS chief economist Simon Rubinsohn, said; “Unsurprisingly, with the retail sector still struggling to find its feet, fewer companies looked to take on new premises last quarter and, consequently, the amount of empty floor space continued to rise. This was the case in most parts of the country.”
Along with the fall in interest in retail space, demand for commercial property in general remains sluggish as the recession continues to blunt business confidence. As a result, surveyors expect rents to slide further over the coming three months. Overall rental expectations have been negative since the onset of the economic difficulties in 2007.
Even in London, the survey reveals, demand for commercial property fell in the third quarter, but this is offset by strong demand for prime office space. This demand has helped the capital keep its head above water in comparison to other areas of the country.
In terms of investment, the picture remains the same with capital values falling in all areas apart from London, which continues to attract considerable overseas investment.
In contrast, the Strutt and Parker (S&P) Business Parks Index shows that this type of investment is still producing healthy yields and that rental value growth is 0.4 per cent up on last year. Victoria Mejevitch, the head of Investment Property Databank (IPD) occupiers, explained that this is because business parks provide investors with the opportunity to meet the needs of 21st century tenants.
She said; “One of the most important requirements for large office occupiers is adaptability of space –they prize being able to change large, open plan offices to their own requirements. Business parks are well suited to provide this adaptability.”
The high street is littered with empty units. It’s such a shame, but as more people turn to the internet it is only going to get worse. Portas needs to do another review and fast!
Thanks for your comment. We agree, something does need to be done but if businesses can’t afford the rent and landlords cannot drop prices then it’s a no win situation.