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Which UK areas are struggling to meet commercial property demand?

Written by: John Padgett on Monday 08/05/2017

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The UK’s entrepreneurial spirit continues to flourish, with a remarkable 5.5 million businesses operating in 2016 throughout the country, over 99 per cent of which are SMEs. However, in some areas, the demand for commercial property outstrips the supply. We take a look at the areas where demand is high and what sectors are faring best.

Regional investment

The country’s regions are out-performing London in terms of transaction volume for the first time since 2013.  In 2015, a total of £24 billion was invested in commercial property – the highest level on record. The reasons for this include an improvement in the UK economy as a whole last year, as well as rising occupier demand, mainly within the industrial and office markets. And while London remains a favourite with overseas investors, particularly within the prime market, the regions beyond the capital offer excellent investment opportunities. Manchester, Edinburgh, Leeds, Birmingham and Bristol are all performing well, both in terms of rent and availability.

Variations

Despite some of the major cities performing well, and meeting commercial property demand, others are failing to satisfy the needs of small and medium sized business owners.

Scotland in general, Edinburgh notwithstanding, has seen a decline in demand during the third quarter of 2016, according to RICS, with at least 12% of prospective business owners failing to have their office needs met.

Away from the capital, data prepared by Oxford Economics reveals that office job growth forecasts were strongest in Nottingham and this is confirmed by RICS’ UK Commercial Property Market Survey – Q3 2016, which shows that office and industrial space in Nottingham remains in high demand, outstripping current supply.

The East Anglian market is also lacking in industrial commercial property, particularly in the mid-Cambridgeshire area, where many commercial property owners are converting their properties to residential, to capitalise on the demand for housing rather than commercial rentals.

The North East is reporting a continued shortage of quality accommodation, particularly among the office and industrial sectors and analysts predict a further shortfall in the future if commercial property values continue to plateau.

In the North West (excluding Manchester) commercial property activity is reduced, especially in the retail sector, where many high streets are suffering due to out-of-town retail parks and shopping centres, leading to a decrease in rents. Although some areas of the North West are seeing an increase in industrials.

The industrials sector in Northern Ireland is currently strong, driven by internal investment, as opposed to overseas’, while in Scotland, excluding Edinburgh, uncertainty surrounds commercial property in light of talk of a second independence referendum.

In the South East, the housing shortage has led to an increase in residential development to the detriment of commercial, leading to a decrease in the availability of commercial properties, particularly industrial units.

Throughout the South West demand for prime commercial space is still outstripping supply and has led to an increase in interest from investors keen to maximise their returns on scarce resources.

The West Midlands has seen strong demand for industrial units and retail premises which contrasts with a sluggish office market.

Yorkshire and Humberside’s rural prime office and industrial market is reported as being under-supplied, increasing rental costs accordingly. Whereas Hull, which will be the UK’s Capital of Culture 2017, is seeing increased interest in small retail units as well as seeing a potential boost by virtue of its status as a renewables hub.

Our quick snapshot of the state of the commercial property market yields mixed results throughout the country, with some areas reporting increased confidence and others sounding a note of pessimism.

If you’re interested in investing in commercial property or wish to rent in any location in the UK, talk to a member of our team. Our highly-qualified and -experienced advisors can offer you advice and information to enable you to make an informed choice about your purchasing or rental options.

Written by: John Padgett on Monday 08/05/2017

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