Yorkshire & Humber’s commercial property remains strong despite dip in supply

Demand for commercial property in Yorkshire and Humber is increasing, with investors seeing the region as a sure bet as rents and capital values look set to continue rising, according to a Commercial Property Market Survey by RICS (Royal Institution of Chartered Surveyors).

The quarterly survey reveals that the industrial sector in Yorkshire and Humber has the greatest momentum in occupier demand; with 53% more chartered surveyors in the region reporting a rise in enquiries from potential occupiers for such space during the months of October-December last year (Q4 2015).

Demand for retail properties in the region also rose during Q4 2015 with 50% of respondents seeing an increase in enquiries for such space.

Office space was the only commercial property type in Yorkshire and Humber to see a decline in demand in the last quarter of 2015, with only 22% of chartered surveyors in the region reporting an increase in enquiries for offices, compared with 58% in the previous quarter (Q3).

However, in the midst of the rise in demand for various types of commercial property across Yorkshire and Humber, supply has continued to fall, with the survey recording a drop in available space across all sectors.

Development in the region has only increased marginally with anecdotal evidence suggesting that there is a lack of commercial construction activity in many areas of Yorkshire and Humber.

Looking ahead, 47% of respondents in Yorkshire and Humber said they expect to see rents rise across all sectors of commercial property over the next 12 months. Respondents are most confident of seeing rental increases in the prime industrial market with 73% foreseeing a rise as opposed to a fall.

Meanwhile, smaller businesses or startups could be put under more pressure due to the lack of incentives available to rent commercial property. Incentive packages (such as offering a discounted rent rate for a small time period) on offer from landlords to tenants fell across each sector in Q4 2015.

Scott Morrison, senior surveyor in the industrial agency team at Cushman & Wakefield, commented: “Yorkshire and Humber’s commercial property market continues to show steady improvement across all property types. But the lack of supply in the freehold market is driving prices upwards. Rental levels are beginning to improve and this is evident across the industrial sector. Demand for investments remains high which is driven by significant availability of investment funds as well as on going stability of interest rates.”

simon Rubinsohn, RICS’ chief economist, added: “For the time being the real estate sector seems largely insulated from the turmoil affecting financial markets. Indeed, the prospect of a ‘low for longer’ interest rate environment provides further comfort for those parts of the property market where values are looking a little stretched and arguably more vulnerable to a material shift in monetary policy.

“One potential consequence of the current climate is that the trend in foreign investment could slow which is a pattern the latest RICS survey seems to be picking up. However, with the economy still set to post growth in excess of 2% in 2016, the backdrop for the occupier market appears reasonably well underpinned.”

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