Commercial Property Trends

04 Jul

Commercial Property Trends

Customer First

Co-working spaces and serviced offices were amongst the most popular commercial property investments from 2016 to 2018. And there’s no sign growth of the market is set to stall.

The UK is one of the biggest markets globally for flexible workspace, as businesses move and adapt at a faster rate, they have differing needs where no one size fits all. Serviced and co-working spaces provide a unique customer experience, and environment. 

Global Capital

In 2018, London was the world’s most popular destination for cross-border investment into real estate. This was due to higher yields in the UK compared to Europe and Asia, which looks to continue, and attract North American investors to the market.

Retail Repurposing

The way people shop has changed due to the rise of internet retailers, and consumer spending habits. As traditional small and big brand retailers adapt to the market, some stores are closed, and retail space is left unused in shopping centres.

To attract people out of their homes, retail space has been repurposed to meet new demands. Opportunities for converting vacant retail units for alternative use include leisure spaces (restaurants, bars, children’s activity areas), logistics, residential, offices, and self-storage. 

Prominent Logistics Sector

Logistics is the most popular commercial property asset class in the UK, and there’s a speculative development boom underway as investors and developers seek to increase exposure to the sector.

Concentrated across three regions London and the South East (35%), the Midlands (31%), and the North West (13%), comprising 8 million square foot of speculative development.

Occupier and investor demand are set to remain strong as supply constraints continue to fuel rental growth.

London Demand

There’s strong tenant demand for commercial space in the capital. In May 2019 alone approximately 13.3 million square feet of office space was under construction over 98 developments. According to CBRE 60% of which was already let or under offer, the highest level achieved in over 15 years.

The Finance and Banking sector accounted for more than half of take-up, while Business services represented 16%.

Regional Growth

Regional cities are evolving quickly due to both public and private investment, but remain undersupplied with new office developments, despite continues employment growth.

Property price growth across the North and Midland, and consumer confidence in regional cities is higher than that in London and the South East. Drivers of commercial property growth in regional cities, include: the resilience of the UK economy, interest from overseas investors, strong focus from government, and yields of between 5% and 7%. 

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