South East: Investors are active as commercial property demand increases

The commercial property market continues to pick up across the South East of England, with industrial and office space outperforming the retail sector, according to the Q1 2017 RICS UK Commercial Property Market Survey.

As regional investor demand in the South East continued to increase for commercial property across all sectors, with 15% more respondents reporting a pick-up in total enquiries, industrial assets have been most sought after in Q1. 32% more respondents in the region saw an increase in demand for industrial space across the UK in Q1.

Overseas investment demand grew across all sectors in Q1, with buyers again showing a slight preference for industrial space.  The industrial sector also performed strongly in terms of capital value expectations with 59% more respondents anticipating prices to rise over the next three months in the South East.

Commercial property demand in the South East increased for the third consecutive quarter with 8% more respondents reporting a rise in demand.  Again, industrial was the strongest performer with 12% more respondents seeing a rise, retail space closely followed at 11% gaining positive momentum.  However, demand for offices is still lagging across the region.  

Consequently, availability across the industrial sector in the South East has declined further. The amount of industrial space available has been falling since Q2 2013. 

Given the demand and supply dynamics in the region, rents are expected to see the strongest growth in the industrial and office sector, both over the next three months, and at the 12-month horizon.

Simon Rubinsohn, RICS chief economist, commented: “The results of latest commercial property survey chime with much of the recent generally more positive economic news flow. Significantly, the forward looking indicators are also proving relatively resilient although it would not be a surprise if activity slows somewhat ahead of the forthcoming general election.

“Although around one-sixth of respondents continue to report enquiries from British businesses looking to find space to utilise elsewhere in the EU, foreign investment into the UK is continuing to recover with the RICS overseas demand indicator rising for all sectors at a headline level and in most parts of the country.”