East faces commercial property crunch as demand plummets
PUBLISHED: 03:00 31 July 2020
A huge rise in homeworking is expected to lead to steep falls in office rents across the East of England.
Both retail and office rents across the East of England are expected to fall sharply as businesses scale back their post-lockdown office footprint over the next two years, according to a Royal Institution of Chartered Surveyors (RICS) survey.
Across the UK, 93% of respondents felt businesses would scale back their office space as more people work from home.
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At the same time, 64% of UK surveyors polled felt offices would increasingly move out to the suburbs, while a move towards local shopping might also help revive town high streets.
But in the eastern region, 82% now consider the market to be in some stage of a downturn, according to the RICS second quarter commercial property survey covering April to June.
Nearly half of respondents saw occupier demand decline in the second quarter of the year.
The east’s retail sector saw the biggest drop in interest with 81% of respondents witnessing a fall in demand, rather than a rise – the biggest drop since 2008.
Demand for office space also fell dramatically with 71% of agents reporting a fall.
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However, demand for industrial space is on the rise with 19% of respondents expect industrial rents to rise in the East.
Unsurprisingly, retail space in the East of England is likely to take the biggest hit, with a net balance of -81% predicting a fall in rents over the next three months.
Meanwhile, in the office sector, 35% of local respondents expect rents to fall in the coming three months.
There has been some instances of interest in secondary units in local high streets, possibly from people wanting to convert it to housing or from independent businesses looking for local homes in the wake of the pandemic.
Around 64% of surveyors in the study felt demand for office space in surburban areas could rise over the next two years.
Anecdotal evidence also suggests there will also be a shift to higher quality office space, with more focus on well-being and sustainability, RICS said.
RICS economist Tarrant Parsons said the latest survey feedback unsurprisingly reflected “the significant disruption and uncertainty that emerged across the economy during the lockdown period”.
“The recent shift into remote-working raises many questions across the office sector, with respondents expecting businesses to re-evaluate their office space requirements over the next two years. On a brighter note, the outlook is already showing signs of recovery across industrial sector.”
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