Brexit uncertainty is causing gloom in Yorkshire’s commercial property market, according to a new study.
The third quarter RICS UK Commercial Property Market Survey found that 67 per cent of respondents believe the region’s commercial property market is in a downturn.
Business leaders have warned that market uncertainty is stifling investment and making firms more cautious about expanding and moving.
Anecdotal evidence suggests that Brexit is having an “increasingly detrimental” impact on market activity, the survey said.
Demand for the region’s industrial property fell this quarter, as did the availability of leasable space in the industrial sector.
The RICS statement said: “The region’s retail sector continues to have more vacancies coming to market, prompting another increase in incentive packages on offer to prospective tenants.
“More incentives are also on offer in the office sector as more of the region’s office space comes available.”
Interest in investing in Yorkshire’s commercial property market fell once again this quarter, with more respondents seeing a fall in investment enquiries.
Investment enquiries from overseas also fell at a faster pace this quarter with a net balance of -11 per cent, marking the third successive quarter where respondents have reported a declining interest in investing in Yorkshire’s commercial property markets.
Looking to the next three months, respondents to the survey predicted that rents will rise in the industrial sector, and fall in the retail sector. Some 39 per cent of respondents expect to see further reductions in rents across retail. In the office sector, respondents also remain optimistic and expect to see rents rise moderately over the next quarter.
Tarrant Parsons, RICS economist, commented: “Although a clear majority of respondents now perceive the market to be in a downturn, the fact that capital value expectations are still positive in many parts of the country suggests a relatively soft landing for the commercial real estate sector is anticipated overall.
“That said, the fallout for retail is altogether more severe. It remains to be seen what impact the latest Brexit developments have on confidence across the sector, but with the picture unlikely to become clear until into the New Year it may well mean hesitation continues over the near term.”
John Trenor, of Brotherton Trenor Land in Leeds, said there had been “continuing hesitancy toward transactions with constant reference to Brexit position”.
Richard Corby, of Lambert Smith Hampton in Leeds, said: “In many respects the UK commercial property market is defying gravity by not going into recession in such challenging times. With the exception of the retail sector, every other sector is demanding more space across the country.
“Let’s hope that we can maintain the momentum until we have political and economic stability.”
Robert Whatmuff, of Colliers International in Leeds, said: “Market uncertainty is currently stifling investment with regards to expansion, relocation and capex.”
Looking further ahead, respondents to the RICS UK third quarter survey expect further cuts in rents for the North East’s retail sector in the coming year.
Industrial property continues to be the biggest attraction in the region and 46 per cent of respondents expect to see rents rise for industrial space in 2020.
The statement added: “Looking at the office sector, 29 per cent of survey respondents anticipate rents to rise, driven primarily by primary office space.”