Tuesday, 15 May 2018

Retail space down, office and industrial space up

When it comes to the UK’s commercial property market, the latest data from RICS suggests it’s a challenging time for retail, but getting better for office and industrial. Andrew Metcalf, director of Maxim and Kent Invicta Chamber of Commerce, looks at the figures and considers what it might mean for Kent.

The Q1 2018 RICS UK Commercial Property Market Survey coincides with a 3.3% fall in retail footfall as the consumer switch to the Internet continues unabated, according to the British Retail Consortium (BRC) and Springboard.

The alarming footfall decline was attributed to poor weather conditions and lower disposable incomes with the BRC recording an unprecedented 4.8% per cent decline over the last two months. The Office for National Statistics has shown retail sales volumes have dropped in each of the first three months of the year.

Divided market

The divide in the commercial property market between retail property and the industrial sector is widening, according to the RICS.

Demand for retail space is at its lowest level since 2009 and the weakness appears to be spreading across prime locations, with RICS reporting a challenging backdrop across the whole of the UK.

Retail property demand is declining at an accelerating pace, with a net 43% of RICS respondents seeing a fall in calls for retail property. In contrast, nearly a third (31%) of respondents saw a net increased call for industrial space.

The survey shows that for a fourth quarter running, retail landlords have responded and raised the value of incentive packages to entice clients, while in stark contrast there was a decline in the availability of industrial space.

Rents up, rents down

With demand low, retail rents are expected to fall over the next three months, whereas they are rising in the near-term in the industrial sector.

The outlook for prime office rents appears positive (net balance +38 per cent) with many suggesting this trend is being driven by the falling supply due to permitted development rights.

Quality streets

RICS is projecting that secondary retail rents will decline in all parts of the UK over the coming year, with the outlook for prime retail sites described as patchy at best.

Primary and secondary industrial markets continue to display stronger rental projections over the year than all other sectors.

Commercial upturn

Trends in the investment market show increasing strongly demand for industrial assets, marginally for offices, but falling in the retail segment.

The supply of property for investment purposes continued to decline in the industrial and office sectors. Retail again bucked the trend, with supply increasing.

The Kent perspective

RICS continues to see demand for high-quality, well-located logistic/industrial sites, despite recent price rises.

Across Kent and Medway there’s new commercial property coming out of the ground, Ashford’s 80,000ft2 Commercial Quarter One, being developed by Quinn Estates, is due to open next month.

Kent Medical Campus, part of the North Kent Enterprise Zone, offers the compelling prospect of 3,000 new jobs, including KIMS Hospital on the 30-acre site near Junction 7 of the M20, close to Maidstone Studios and Eclipse Park.

There are solid performers like Kings Hill, Discovery Park, Kent Science Park and Medway City Estate, with pockets of smaller developments across the county. However, there’s a growing undersupply of high quality property on the market, with much being lost to residential.

What’s needed now is for investors – and that includes our local authorities – to seize the opportunity to bring forward much-needed office and industrial space

Ashford BC and Sevenoaks DC have led the charge to financial freedom by investing in commercial property, and it looks like Medway Council is to follow suit with £120m being invested across 12 sites through its own development company.

It will also be down to Kent & Medway Economic Partnership, through the South East Local Enterprise Partnership, to secure national funding to help unlock sites for commercial development, as well as much-needed residential.

Further information can be found at www.kentpropertymarket.com sponsored by Caxtons and Kent County Council.


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