Industrial demand soars but retail lags behind

The number of vacant shops rose for the third consecutive quarter at the end of the year with 23 per cent more people reporting a fall in demand from prospective tenants than the previous quarter - the lowest reading since 2011.

According to the latest quarterly RICS (Royal Institution of Chartered Surveyors) UK Commercial Property Market Survey, which covers the three months to the end of December 2017, the retail sector was the only area of the market in the region to see an increase in the availability of leasable space.

Retail rents are expected to decline in the near term, and this picture is predicted to continue over the next 12 months, the report said.

However, although rent projections for prime retail space were downgraded from a slightly positive outlook to flat in the fourth quarter of the year, the weakness in retail rental values is mostly in secondary retail locations which have slipped further into negative territory.

Meanwhile, even though industrial property continues to be the outperformer in Yorkshire and Humber’s commercial property market, demand during the quarter fell slightly.

But rental growth expectations are positive with 37 per cent of respondents anticipating a rise in industrial rents over the coming three months.

Occupier demand for offices also fell during Q4 but rent expectations over the near term remain healthy with 27 per cent of respondents expecting rents to rise over the coming three months, the report said.

Looking further ahead at industrial and office space, over the next 12 months both prime and secondary industrial rents are predicted to rise sharply, along with prime office rents, whilst the outlook for secondary offices remains flat.

Simon Rubinsohn, RICS chief economist, said: “The weakish tone to the Q4 survey results for the retail sector sit comfortably alongside the generally disappointing trading statements from the high street in the run-up to Christmas.

“The counterpart to this is the ongoing strength in demand for well-located warehouses to support the inexorable rise of the online consumer. Meanwhile in the office sector, the resilience of the headline rent indicator is masking the increasing attractive inducement packages required to encourage take up of space.”