Understanding the dynamics of commercial property in the UK is imperative for potential property investors. The landscape consistently evolves, and the sectors that are currently in high demand may not be the ones you intuitively think of. Let’s have a closer look.
Current High-Demand Sectors
So, where exactly is the commercial property market buzzing? As per the latest research from Sirius Property Finance, the current crown holder is the industrial and warehouse space sector. Nowadays, every company finds itself in a competition to deliver online purchases to customers’ doors as efficiently as possible. Businesses are continually exploring avenues to satisfy their logistical needs, and this quest has placed a great emphasis on the demand for warehouses and industrial spaces.
Furthermore, this sector is managing to keep its demand levels robust, withstanding the market fluctuations that other sectors have succumbed to — a testament to the influence of internet businesses. This sector’s strength even amid a cost of living crisis shows its resilience, which is an encouraging sign for potential investors.
The study by Sirius analysed demand across the commercial property sector by evaluating the number of commercial assets already sold subject to contract (SSTC) in relation to the total available assets in the market. So, if 50 out of the 100 assets on the market are SSTC, the demand is determined as 50%.
The Regional Picture
Geography plays an essential role when considering property investment. In this case, the West Midlands takes home the prize for the highest demand in industrial and warehouse spaces, with 43.2% of listed assets already SSTC. But it’s the South West that has experienced the most significant demand surge recently, registering a 3.8% quarterly increase.
Office and Retail Spaces: A Quiet Market
The demand for office spaces in England currently stands at 27.6%, having dropped by 2.7% this quarter. Regionally, the West Midlands again has the most demand (37.9%), but it’s the North East that has seen the most significant quarterly uptick – 1.8%.
The retail space scenario isn’t particularly different from office spaces. The demand for retail property in England sits at 23.5%, down by 0.9% this quarter. The hotspot for retail demand is currently the South East, where 29.4% of assets are SSTC. The South East area also has recorded the most substantial quarterly demand increase, at 3.4%.
Such quiet times for office and retail units are leading to a reassessment of how such spaces are to be utilized. This rethink is pointing towards an evolution in the use of such areas, creating promising opportunities for discerning investors and developers.
Struggling Sectors: Leisure and Hospitality
Not all sectors are enjoying a peak in demand. Particularly, leisure and hospitality spaces find themselves at the opposite end of the spectrum, proving to be the least favoured among commercial properties in England. Only 13.2% of listed spaces in this category are SSTC, indicating a lack of buyer enthusiasm.
Yet, it’s not all doom and gloom for this sector. The West Midlands region provides a silver lining, with a demand standing at a relatively higher 20.6%, having increased by a commendable 6.4% since last quarter.
Final Thoughts
Nicholas Christofi, the managing director of Sirius Property Finance, rightly points out that current economic uncertainty and the subsequent conservative spending behaviour among households have negatively impacted the leisure and hospitality sector. However, he strikes a hopeful tone and highlights the opportunities that the current market situation presents.
Aiding the spirit of online retail, warehouse and industrial spaces continue to be prosperous. As for office spaces and retail units, there may be a temporary lull, but the evolution they are undergoing is promising for smart investors who can identify and leverage these opportunities. Indeed, it will be interesting to see how our relationship with retail and office spaces changes in the near future – another reason for potential investors to keep a close watch on these sectors.