Tenant demand for commercial property has hit new heights, according to a survey by the Royal Institution of Chartered Surveyors (RICS).
The latest survey showed 52% more surveyors reporting higher demand from clients for space in the first quarter of the year. The increase marks six solid quarters of demand growth with the upswing particularly marked for offices and industrial real estate.
It showed that demand has risen in all regions outside London, proving that the recovery is no longer limited to the capital.
RICS data also found that fresh demand for commercial property is outstripping supply, resulting in rising rents, with surveyors reporting four quarters of declining supply as suitable commercial space is snapped up.
A net balance of 30% of surveyors reported a further drop in the availability of office space, while surveyors’ expectations for rising rents hit the highest level since before the financial crisis. Surveyors reported 12 month rental expectations of about 4.5% for office space, with capital values expected to rise by 5 percent over the period.
Surveyors also reported sharp demand for industrial space, with reported availability falling steadily since the first half of 2012. On a 12-month view, surveyors on average are looking for rents to grow by 5.5% with capital values expected to rise by 6%.
In contrast, the outlook for the retail sector, while still improving remained less buoyant. The net balance of surveyors reporting stronger demand for retail space was little changed from the fourth quarter of last year at 35%.
Nevertheless, available space in the sector has now slipped albeit only modestly for two consecutive quarters which helps to explain the greater expectations on the outlook for retail rents which are projected to rise by around 3 percent. Significantly, investor appetite to acquire retail space is strengthening as the economic recovery gathers pace and this has been reflected in a jump in the enquiries net balance from 38% to 54%.
Simon Rubinsohn, RICS chief economist, said: “Today’s figures show demand from occupiers for commercial space is continuing to strengthen and, offers further proof that the economic recovery is gathering traction. Although the central London market remains particularly hot, it is encouraging that demand is now also rebounding away from the capital. Moreover, there are also signs that investors are widening their horizons with enquiries to acquire real estate picking up in many parts of the country.
Colin Harrop, director of project and development services at Jones Lang LaSalle in West Yorkshire, said: “Commercial activity seems to be rising in Yorkshire and has been for some time now.
“We’re seeing strong demand for all kinds of commercial property – offices, industrial space and retail units. The recovery is taking hold and gaining momentum, and we hope to see it continue in the months ahead.”
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