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Demand for industrial units driving momentum in East's commercial property markets

PUBLISHED: 15:00 25 February 2018 | UPDATED: 16:43 25 February 2018

Rising demand for industrial units, fuelled by the rise of logistics companies fulfilling orders for online retailers, has made industrial the top-performing sector in the latest RICS survey. Picture: Archant.

Rising demand for industrial units, fuelled by the rise of logistics companies fulfilling orders for online retailers, has made industrial the top-performing sector in the latest RICS survey. Picture: Archant.

Archant © 2007

Industrial property remains the standout performer for the commercial property market in the East, according to a sector survey.

The Royal Institution of Chartered Surveyors’s (RICS) quarterly healthcheck also recorded positivity in retail, while overall the market was viewed as fair value by most respondents in the final quarter of last year.

In the industrial sector, occupier demand rose for the second quarter in a row, with 21% more respondents reporting a rise in demand from prospective tenants. Interest in the offices sector flattened towards the end of 2017, while interest in retail space was moderately positive.

Over the next 12 months, rents in all three sectors are expected to rise strongly, said respondents, though industrial units will lead the way.

On the investment side of the market, 22% more agents reported an increase in enquiries from investors in the last quarter – the second consecutive quarterly rise – with industrials once again attracting the most interest.

However, there was a noted decline in the availability of investable commercial property in the East over the quarter, though the pace slowed from the previous quarter.

Capital value gains are expected to be positive across the board but strongest once more in the industrial sector, the survey showed.

The majority of surveyors – 69% – said they felt the market offered fair value, while the proportion viewing the market as overpriced dipped to 19% in Q4.

Simon Rubinsohn, RICS chief economist, said: “The weakish tone to the Q4 survey results for the retail sector sits comfortably alongside the generally disappointing trading statements emanating from the high street in the run-up to Christmas.

“The counterpart to this is the ongoing strength in demand for well-located warehouses to support the inexorable rise of the online consumer.

“Meanwhile in the office sector, the resilience of the headline rent indicator is masking the increasing attractive inducement packages required to encourage take-up of space.”

What surveyors in the East of England thought

Andrew Bastin of Bastin Commercial in Norwich said: “Brexit continues to be the expletive used when justifying delays or cancellations of potential occupier decisions, while lack of quality stock in the business space sector limits the agent’s counter-argument. This is leading to a build-up of latent demand which may only be met if rental aspirations significantly improve. Meanwhile, the ‘nearly-there’ stock of office and industrial space will remain the focus of attention, to the detriment of the secondary markets.”

Sam Kingston of Roche Chartered Surveyors in Norwich said: “The market continues to perform well across the industrial sector, driven by lack of supply and no new development - helping second-hand values. The office market remains relatively stagnant, but permitted development continues to diminish stock, helping with rental values.”

Guy Gowing of Arnolds Keys said the company was “looking forward to an optimistic start to 2018”, while Gordon Ellis of Merrifields in Bury St Edmunds described the mood as “apprehensive”.

Richard Pyatt of Hazell Chartered Surveyors in Bury St Edmunds, said: “There is significant demand for logistics space within the Eastern region, with very few available units of development deliverable within 12 months,” adding that Suffolk park in Bury St Edmunds was “one of the few deliverable options”.

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