Retail still Lagging Behind in Three Speed Commercial Market

Posted on 19 June, 2015 by Cliff Goodwin

After an impressive year, the recovery in the commercial property market has settled into a three-speed jog, with offices and retail travelling at two very different rates, separated by industrial property in the middle lane.

ID:83605961

Following the heady capital growth of 2014 the winter and early spring were a time of deceleration for commercial property, Knight Frank reports in its monthly UK Market Outlook — “But the improvement we again saw in May was not evenly spread with offices surging ahead, industrial achieving a less dramatic increase, and retail barely seeing any improvement.”

Attempting to explain the disparity the June report, written by the firm’s chief economist James Roberts, says: Industrial in recent years has enjoyed a fillip in the occupier and investment market from the rise e-commerce, but that is no longer ‘news’.

“Investors, possibly, now view the internet effect as priced in, taking some of the heat out of the market.” This, Roberts says, is perhaps a healthy downwards gear change, “especially as the internet is no longer expanding its market share in retail as aggressively as a few years ago”.

Meanwhile in the London office market, the development pipeline has been slow to respond to demand and this is pushing up prices and rents, encouraging occupiers and investors to look to the regional markets.

“In the financial sector in particular, occupiers are reviewing which business functions need to be in the capital, and other UK cities are starting to benefit. Investors may take the view that there are plenty of further opportunities to explore in the outperforming office sector before revisiting the more embattled parts of retail.”

Attempting to explain the underperformance of retail property is even harder, admits the economist. “After all, the UK retail sales figures have been robust for some time, and the consumer has done much to support gross domestic product growth by compensating for sluggish export demand and a retrenching government.

“Plus, there are the new occupier groups and shopping formats that have emerged to meet changing consumer trends, such as cafés, mini supermarkets, and click-and-collect. These should be compensating for problems elsewhere in the sector.”

Taken as a whole, the commercial market is continuing to return to pre-recession levels. The all property capital growth index rose by 0.8 per cent in May, which is up month-on-month on the 0.5 per cent reported for April. And investment volume from January to May totalled £23.6bn, up from £17.8bn for the same period in 2014.




Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.


Recent Posts

Interest Rates Impact on Commercial Property

Commercial Property Investment Outlook for 2023

The best places to stay on the Riviera

The latest property data has identified Newquay as the fastest property seller’s market in the UK

Investing in your garden can increase your property’s value

French Riviera temping high-end homebuyers

How can the ownership rights of my commercial property impact a business sale?

Should I incorporate virtual property viewings permanently?

Investment expected to increase across Asia-Pacific in 2021

UK property industry slows as the conclusion of tax break looms

BNP Paribas cautioned investors on Friday as debt-trading bonanza that increased its earnings this past year

Over 300,000 property purchases fell through in 2020 – we show the most frequent motives and the best way to get your house sale back on track

House Prices in the Capital Surpass £500,000

Optimism from the Bank of England’s chief economist

The most expensive commercial properties.

Businesses operating from shared premises will miss out on grants