Brexit vote stalls UK commercial property market
This reflects the results of the June RICS Residential Market Survey, which revealed that Brexit uncertainty had taken its toll on markets in most parts of the UK, as price growth continues to falter.
The commercial property survey reported that 36% of respondents across the UK believe the market is in the early stages of a downturn. London had the highest proportion of respondents (54%) taking this view
The survey showed that on a UK-wide basis, occupier demand failed to rise for the first time since 2012. It also demonstrated that occupier demand had “moderated” across the UK as a whole, with London experiencing more of a shift than in other parts of the country.
The rental outlook is also most negative in London, with rents projected to fall by around 3% over the next 12 months.
Looking at sectors, declines were reported in the office and retail areas of the market, but the survey indicated that the industrial sector is holding up.
The survey pointed to demand weakness on the investment side of the market. During Q2, investment enquiries fell sharply by -16% down from +25% in the previous quarter, with foreign investor demand taking a nosedive to -27%.
Respondents across the UK observed a drop in overall investment enquiries, but again, London felt it most. At -41%, the investment enquiries gauge for London was at its lowest in seven years.
The supply of property for investment purposes remains tight with respondents reporting a decline in investable stock for the eighth quarter in a row. The lack of supply continues to be most obvious in the industrial sector.
The survey also showed that in London, twelve-month capital value expectations are in the doldrums. A net balance of -35% more surveyors expect a decline in prices over the next year, compared with the fourth quarter of last year, when a balance of +73% more respondents anticipated a rise in capital values, on a twelve-month basis. Looking at the three-year time horizon, all areas, with the exception of Scotland and London anticipate seeing capital values return growth.