STRONG RENTAL GROWTH SHOWS NO SIGN OF EASING

Tuesday, June 9, 2015

The RICS UK Commercial Property Market Survey results for Q1 2015 show no sign of rental growth easing on the occupier side of the commercial market. In fact, relative to the previous quarter, the pace at which conditions are improving accelerated. This is driving strong expectations for continued widespread rental gains in the short term and beyond.

CVS is completely focused on the occupier market and it is clear that the demand for leasable space has increased for all sectors over the past two years. This now represents the longest period of uninterrupted demand growth since the RICS Survey was launched back in 1998. Moreover, the rate of improvement quickened within all areas of the market in the first quarter of the year.

Alongside this, available space continued to fall right across the board according to the Survey. Indeed, while decline in the retail sector was more modest, both the industrial and office segments experienced a steep fall in availability. Anecdotal evidence from contributors to the RICS Survey frequently highlight lack of supply as an issue, especially in the office sector, where conversion of units into residential property has reduced stock significantly.

What does all this mean for you?

It is these increasingly tight market conditions which are driving strong rental expectations for rent reviews and lease renewals, where near term rental projections are strongest in the office and industrial sectors, while retail continues to lag behind (although still in positive territory). The twelve month outlook for retail rents is much more upbeat, particularly for the prime High Street. Nonetheless, the office sector is projected to post the sharpest rental growth over the year ahead and will continue to do so over the next three years.

On a regional level, expectations for rental growth remain more elevated in London than all other parts of the country. Even so, rents are still anticipated to increase in all four broad regional groupings, across all sectors in 2015 (albeit growth looks set to remain marginal in some secondary retail markets).

Time is of the essence to enter into negotiations early with your Landlord on any forthcoming rent reviews or lease renewals, so the impact on rental growth is minimised for your property.

The CVS Business Rent Reduction service is here to help!