Retail rents drop across Yorkshire as vacant shop numbers rise
Industrial property continues to be the preferred choice of commercial space in Yorkshire and Humber’s property market, as retail lags significantly.
Those are the findings of the latest quarterly UK Commercial Property Market Survey for the Royal Institution of Chartered Surveyors.
During the last quarter of 2017, occupier demand for retail space in Yorkshire and Humber fell for the third consecutive quarter with 23 per cent more respondents reporting a fall in demand from prospective tenants.
This is the lowest reading since 2011 and alongside this, the retail sector was the only area of the market in the region to see an increase in the availability of leasable space.
Rents for retail space are expected to decline in the near term, and this picture is predicted to continue over the next 12 months. That said, the weakness in retail rental values is mostly in secondary retail locations which have slipped further into negative territory.
Even though industrial property continues to be the outperformer in Yorkshire and Humber’s commercial property market, demand during Q4 2017 fell slightly, with 32 per cent more respondents seeing a rise in demand for industrial space (down from 54 per cent in Q3 2017).
However, as demand for industrial space remains healthy, rental growth expectations are very positive with 37 per cent of respondents anticipating a rise in industrial rents over the coming three months.
Looking at the office sector, even though occupier demand for offices also fell during Q4 2017, with 23 per cent of respondents reporting an increase in demand for such space (down from 44 per cent in Q3 2017), rent expectations over the near term remain healthy with 27 per cent of respondents expecting rents to rise over the coming three months.
Over the next twelve months both prime and secondary industrial rents are predicted to rise sharply, along with prime office rents, whilst the outlook for secondary offices remains flat.
Moving to the investment side of the market, during Q4 2017, 57 per cent more respondents cited an increase in enquiries from investors for industrial space, followed by 27 per cent for offices and just seven per cent for retail space.
In the face of increased interest, the supply of investable office and industrial units continued to decline during the last quarter of 2017, but a stable trend was noted in the retail sector.
In relation, near term capital value gains are expected to be most significant in the industrial sector with 45 per cent of respondents anticipating a rise in capital value gains, but they also strengthened slightly in the office sector, with 25 per cent of respondents expecting a rise in office capital values, up from 18 per cent in Q3 2017.
John Dawes of Mark Jenkinson & son in Sheffield said: “The industrial sector is particularly buoyant. Demand for industrial premises for both letting and purchase continues to push up rents and capital values as the supply is squeezed due to a shortage of new buildings entering the market across the size range. Secondary retail continues to be difficult as a result of changes in retail habits and pressure from internet sales. However, the right property in the right location is attracting a good level of demand.”
Simon Rubinsohn, RICS Chief Economist added: “The weakish tone to the Q4 survey results for the retail sector sit comfortably alongside the generally disappointing trading statements 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.”