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The commercial property market
28 May 2024

2023 saw the commercial market witness a period of stagnation due to a significant uplift in interest rates and inflation. The office and retail sector were most affected.

It is thought that interest rates have now peaked, and there are obvious signs that the rate of inflation is falling as we enter the second quarter of 2024. This in turn has had an impact on the commercial market. We have witnessed an uplift in office enquiries with more businesses demanding a more consistent office attendance, rather than home working.

The retail sector is still experiencing challenging market conditions, with short-term lettings being favoured by tenants, who want the comfort of knowing that if trading does not go as hoped, they are not committed to long-term contracts.

The industrial and warehouse market is still seeing a proficient level of demand. Pre-pandemic, High Street retailers were the dominant occupier of warehouse space. Now, the largest increase in occupation is by online retailers, who have increased their footprint from 8 million sq ft to 69 million sq ft nationally, a rise of 813%.

The supply of new units is very limited, and the development pipeline will remain restricted, given the constraints on construction and labour costs. This is beneficial for the owners of any existing high-quality buildings.

Competition amongst occupiers for existing and new build commercial units has helped maintain upward pressure on rental values. There are expectations of a further rental growth in the year ahead, as reported in the RICS UK Commercial Property Survey.

For more information or to find out how our Commercial department can help you, please contact Milena.

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