Differing views on the prospects for the commercial real estate market after the first quarter and the near future of the sector

Following an analysis of the first quarter, a mixed outlook for the commercial real estate sector has been presented, with optimism regarding property supply and demand growth expected in the near future.

NAEA Propertymark sales representatives were asked to share their views on the level of supply and demand in the sector over the next 12 months, with 50 per cent of respondents predicting an increase in supply, while around a third predict a corresponding increase in demand.

Propertymark’s latest real estate forecasts for Q1 2024 are a range of data that paint a mixed picture for the sector’s immediate future, according to the estate agents’ trade body.

In the office sector, 40% of respondents expect supply to increase, while 80% suggest demand will decrease or remain the same.

Nathan Emerson, CEO of Propertymark, said:

“Members’ views vary across sectors, but there is significant optimism in the Land & Yards and Industrial sectors.

“The supply-demand imbalance remains, particularly in the pub and restaurant sector, which continues to be impacted by changing trends. However, as the economy stabilises, we remain optimistic about the prospects for the UK commercial property sector.”

In the takeaway sector, 27 percent of surveyed members expect both demand and supply to increase. But in the industrial sector, 50 percent of members predict demand will increase, while 25 percent predict supply will increase.

The organisation said sentiment in the land, yard and industrial sectors was positive as capital values ​​rose, but the outlook was bleak in the pub and restaurant sector, with sentiment deteriorating further compared to the last quarter.

The same positive sentiment remained in the industrial, land and shipbuilding sectors regarding rent levels. However, the office and rental sectors remain negative regarding rent levels

Meanwhile, 58 per cent of members said rents had increased following rent reviews in Q1 2024. Only 16 per cent said they had decreased as a result of rent reviews.

Michael Sears, member of the Trade Advisory Panel, comments:

“The appetite for city centre retail continues to be predominantly local, but there are some encouraging signs that brands are starting to step up their activity. Demand for larger open-plan offices remains weak, but there has been an increase in demand for smaller offices in business centres.

“With the government’s proposals for high street rental auctions set to hit the market from September, the devil is in the detail of how this might work. We need to avoid unintended consequences of driving down prices, rents and, as a result, investment and regeneration in town centres.”