Commercial property has been hit hard over the Covid period. Rightmove, with its copious amounts of data, has identified something of a turnaround.
It’s well known that the commercial property market suffered steep declines in buyer activity since Covid. In fact, according to property agents CBRE, during 2023, compared to 2022, retail transaction volumes were down by around 30%, while office and industrial investment both were down around 50%.
Even more concerning for commercial property landlords, capital values also fell in 2023, with month-on-month declines throughout the second half of last year bringing a cumulative decline in headline values since mid-2022 to 22%. This followed a similar decline of around 21% in 2022, says CBRE.
A disastrous period for commercial property
It’s been a disastrous period for owners of UK commercial property, many of whom are facing demands to plough in more capex, more investment to bring their properties up to modern post-Covid layouts, and to meet environmental standards. But there are now signs that there’s a turnaround on the horizon.
Ironically, the Autumn Budget changes, in no way favourable to business in many ways, may encourage more investment in commercial property due to the now wide differential vis-à-vis residential property in stamp duty (SDLT) rates.
Rightmove’s new Quarterly Commercial Insights Tracker shows that there has been a jump in demand to invest in commercial property compared to last year:
New data from one of the UK’s leading property portals listing commercial property, Rightmove’s data shows that there has been a jump in demand for and to invest in commercial property compared with this time last year.
Rightmove says its new Quarterly Commercial Insights Tracker analyses millions of data points from the largest and most engaged commercial audience in the UK, to track supply and demand over time.
Demand is measured by all enquiries to commercial agents about listings for lease, or to invest in via Rightmove. The data shows that demand to invest in commercial properties of all types has risen by 11% compared to the same three-month period last year, the biggest quarterly jump in demand since 2021.
The industrial sector takes the lead
The industrial sector has seen the biggest increase within the sector. Demand to invest in industrial commercial properties is up by 34% compared with Q3 2023.
Some experts suggest, says Rightmove, one contributing factor could be the Bank Rate cut in August, and a trend of lowering mortgage rates in the commercial property market, which has made borrowing finance cheaper.
However, it should be noted that these data won’t take into account any reaction to the overall impact of the Autumn Budget on UK business activity going forward, which has been widely criticised for its potentially anti-growth impact on the economy.
Andy Miles, Rightmove’s MD of Commercial Real Estate commented:
“We’ve seen some sharp increases in demand across all sectors in the investment market when compared with the same period a year ago. A likely contributor is falling interest rates, which is of course decreasing the cost of capital and making investing in commercial property more attractive.”
Claire Williams, Head of UK & European Industrial Research at Knight Frank has said:
“This year, we have seen a return to a steady and robust occupier market, with take up of industrial space on a par with levels recorded in pre-pandemic years. With inflation now below the Bank of England's 2% target and above inflation wage growth, the economic outlook and consumer confidence are improving. Consumers starting to loosen the purse strings and spending more on discretionary goods, in turn, driving demand for more delivery services. As a result, businesses are feeling more confident in pushing forward with expansion or relocation plans, in turn, boosting demand for industrial and logistics facilities.
“It’s a really interesting time for the industrial and logistics sector. Managing supply chains is becoming more complex, with a heightened emphasis on sustainability across global networks. Businesses now face growing reporting requirements and an increasing demand for supply chain transparency. Geopolitical threats and tensions are also reshaping international supply chains. Given the sector's close ties to transportation and global networks, it stands at the forefront of these changes.
“As a result of these growing complexities, businesses are increasingly turning to specialist third party logistics firms (3PLs) to manage more of their supply chain infrastructure. These specialised firms leverage cutting-edge technologies—such as artificial intelligence (AI), big data analytics, and blockchain—to optimise supply chain ecosystems and offer end-to-end visibility and enhanced decision-making. As these technologies become more widely adopted and logistics services are increasingly outsourced, we will see demand progressively focus on well-located, modern facilities.
“We expect both leasing and investment activity to further strengthen. We are in the early stages of an interest rate cutting cycle, and as debt financing costs reduce, we will see greater levels of activity from developers, operators and investors.”
John Mitchell, Managing Director at Christie Finance proffered:
“Although the Bank of England Base Rate is starting to fall, there is an acceptance that rates are not going to return to the record lows experienced from 2009 to 2022. During this 13-year period, investors became accustomed to borrowing very cheap money. Times have changed and there is now greater uncertainty. Therefore, some investors are potentially diversifying away from residential investment and looking for higher yields, and commercial property generally offers this. Coupled with strong availability of bank funding, the commercial market is becoming increasingly attractive”.
Rightmove highlights:
The industrial sector is leading the way in the leasing market. Demand to lease industrial commercial properties is up by 10% compared with the same three-month period last year, the most of any commercial sector. Supply is also up by 14% in this sector compared with this time last year.
In the Central London office leasing market, boroughs to the west including Westminster and Kensington & Chelsea are seeing a rise in demand, while the City of London also returns to positive growth this quarter. By contrast boroughs to the East including Hackney and Tower Hamlets have seen a drop in demand compared with the same three-month period last year.
Rightmove offers a large selection of properties for sale and to rent, has one of the biggest listings and claims that over 80% of all time spent on property portals is on Rightmove. The portal includes residential resale, new homes, rentals, commercial property and overseas properties and use tools and information including getting a Mortgage in Principle, checking local sold prices, property valuations, market trends, maps and schools. Founded in 2000, Rightmove listed on the London Stock Exchange in 2006 and is a member of the FTSE 100 index
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