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26 January, 2018 - 11:32 By Kate Sweeney

Demand for industrial space rises in the East

In the East of England’s industrials sector in Q4 2017, occupier demand rose for the second consecutive quarter with 21 per cent more respondents reporting a rise in demand from prospective tenants, says the latest RICS survey.

Alongside this, respondents in the East noted that demand in the offices sector flattened in Q4, while interest in retail space was moderately positive.

In light of rising demand for industrials, respondents also noted near term rents are expected to increase for the industrial sector and this picture is predicted to continue over the next 12 months. Alongside this, respondents anticipated broadly flat near term rents for both the offices and retail sector. Consequently, the value of landlord incentive packages for industrials in the region has continued to decline – a trend prevalent since 2012. 

Looking further ahead for industrial and office space, in the East, over the next 12 months, all three sectors’ rents (offices, industrials and retail) are expected to rise strongly – with industrials predicted to be the strongest.

Moving to the investment side of the market, across all sectors, 22 per cent more respondents in the East cited an increase in enquiries from investors in Q4, which is the second successive quarterly rise.

By sector, investors were most interested in industrial, with demand picking up strongly; retail and offices are similarly positive but less so. Nationally, interest from overseas buyers continued to rise modestly with growth evenly matched across each market sector.

In terms of the supply of investable commercial property in the East, respondents noted a continued decline in availability in Q4, but the pace of decline has eased from Q3. 

Near term capital value gains in the region are expected to be most significant in the industrial sector with 41 per cent of respondents in the East anticipating a rise; gains are also rising in the office and retail sector. At the 12 month horizon, in the East, industrial assets once again exhibit the firmest twelve month outlook, while offices comfortably positive and retail still expecting rises but less so than the aforementioned sectors.

Moving to perceptions of market value, across the Eastern region, as a whole, the proportion of respondents viewing the market as overpriced eased to 19 per cent in Q4. The majority (69 per cent) of respondents viewed the market as fair value.

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.

“Valuations particularly in the capital’s office market continue to look stretched but overseas investors remain ready buyers for now even as domestic money seeks out opportunities elsewhere around the country.”

• PHOTOGRAPH SHOWS: Simon Rubinsohn, chief economist, RICS

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