Yorkshire’s retail property sector continues to struggle as the number of empty shops rises and rental expectations for the year ahead remain negative, according to a new report.
Anecdotal evidence suggests that greater clarity over Brexit will spur on commercial property activity this year but it is unlikely to change the fortunes of the retail market, according to the Q4 2019 RICS UK Commercial Property Market Survey.
The latest results show the number of people looking to rent retail space continued to fall, as a net balance of -49 per cent of respondents reported a decline in Q4, continuing a downward trend that was first seen in Q4 2016.
The number of empty retail units rose once more during the quarter as a net balance of +38 per cent of respondents saw an increase in available retail space.
The prolonged increase in available units has prompted a further rise in incentive packages, as 49 per cent more respondents reported a rise in inducements on offer to prospective tenants.
As more retail units remain empty, rental expectations for the coming three months and year ahead remain negative.
In the coming three months, a balance of -35 per cent of respondents expect to see a fall in retail rents. Capital value expectations also remained downbeat in Q4 for Yorkshire’s retail sector as a net balance of -42 per cent expected a fall.
Investment also declined in Q4 as a net balance of -36 per cent of respondents reported a drop in the number of enquiries for the region’s retail space for the second successive quarter. Overseas investment enquiries also reduced this quarter.
The amount of leasable space also failed to keep up with demand as the net balance returned a flat reading in Q4.
The imbalance between supply and demand saw 23 per cent more respondents, suggesting that rents will rise in early 2020 for the industrial sector.
Overall, investors from the UK and overseas showed the most interested in the region’s industrial sector, with 16 per cent more respondents reporting a rise in interest.
There was a marginal increase in interest from domestic investors, with three per cent more respondents reporting a rise in enquiries.
Meanwhile, the office sector saw modest growth in interest from prospective tenants this quarter, whilst the number of available units was flat.
Respondents to the survey also expect office rents to rise in the coming three months.
Interest from investors, domestic and overseas, fell during the quarter with 18 per cent more respondents reporting a decline in enquiries from domestic investors.
Tarrant Parsons, RICS economist, said: “Expectations appear to have strengthened in the office and industrial sectors following the decisive outcome of the general election, with markets in prime locations in particular seeing projections for capital value and rental growth revised higher.
“That said, this improved sentiment has not found its way into the retail sector, where the outlook remains just as downbeat as before.”
He added: “Given the continued rise in retail vacancies and sharply falling demand, any change in fortunes across the sector still seems to be some way off.
“In the meantime, further downward adjustments in rents and capital values expected both in the year to come and further ahead.”