According to the Propertymark Commercial Outlook Report, the UK’s commercial property market has seen an optimistic projection in May, which outperformed the expectations of the previous two quarters. This positive turn has been ascribed to the better-than-expected performance of the UK economy.
The report identified the land and yards sector as the best positioned to withstand the pressures of inflation and interest rate increases, with expectations of rises in capital values, rental levels, and investment yields over the next year.
However, not all sectors have seen such optimism. For the third consecutive quarter, the pubs and restaurants sector has the poorest outlook for the coming year.
Factors such as the cost of living, energy prices, and interest rate increases have strained occupants’ finances, resulting in a rise in liquidations and supply. Consequently, rental levels, capital values, and investment yields are expected to decline.
Propertymark’s commercial agents have also cited high costs and difficulties in securing finance as the predominant concerns at present.
Further investigation into the challenges facing the commercial agency sector revealed inconsistencies in planning processes and policies, delays from solicitors, and tightened restrictions on lending.
Anthony Meadowcroft, Propertymark CEO, voiced his concerns about the slow start of the commercial property market in 2023. “Since the Kwarteng budget of September 2022, the market has been subdued. And while we have continued to see small gains in capital values, there seems little drive in the market from investors at present,” he said.
Meadowcroft pointed out an observed increase in conversions from pubs, restaurants, and offices to residential properties. However, even this market seems constrained due to a current lack of investor interest.
Meadowcroft called for an urgent Government review of planning procedures and a loosening of lending restrictions to encourage new investments and stimulate economic growth.
