Commercial rents squeeze on businesses

UK businesses are predicted to face further financial pressures, with commercial rents in the South West expected to rise by 3.8% on average over the next 12 months, the Royal Institution of Chartered Surveyors (RICS) warned today.

The RICS UK Commercial Market Survey, Q3 2015, reveals that businesses in the South West are likely to experience the most significant rental increases within the prime office and prime industrial sectors over the next 12 months, at around 4.4% and 5.6% respectively.

Demand for commercial properties continues to rise among both renters and investors, with improvement continuing across the UK. The survey reveals that 19% more respondents in the South West had seen an increase in rental or occupier demand over the last quarter across all sectors, with growth in demand for industrial and retail growing at a faster pace than for office space in the region. However, 32% more respondents believed supply of commercial property in the region had decreased, for the tenth consecutive quarter, helping to drive up prices. This is generally consistent with the broader national picture.

Commercial property values are expected to continue to rise relatively strongly over the next twelve months. Retail property is projected to remain the back-marker relative to office and industrial property across all regions whilst in the South West just 6% more respondents experienced a rise in foreign investment enquiries over the last quarter- the lowest of all regions in England.

RICS Chief Economist, Simon Rubinsohn said: “While for individual businesses, the rise in rental values might not be particularly welcome, as a bellwether for the UK economy, the survey highlights some very reassuring growth patterns.

“Nationwide, we’re seeing a solid increase in demand for commercial properties across retail, office and industrial sectors. In other words, at the moment, however badly rental costs might pinch, they do not appear a barrier to growth.”
Alistair Edgcumbe of Larkman Edgcumbe has said:

“Summer holidays being over, we expect the market to show some extra bounce before the Christmas recess. The signs are hopeful, enquiries are up and rents have stabilised from the downward trend experienced over recent years.”