Currently, the National and Regional news seems to be dominated with stories of economic doom and gloom: inflationary pressures, rising interest rates, looming recession, spiralling energy prices and the cost of living crisis.
All these factors will undoubtedly play their part in restricting and supressing growth prospects in the commercial property market. Activity has certainly slowed in the last 6-9 months, but surprisingly, requirements across all sectors are still relatively buoyant and commercial properties are still being let or sold for either occupation or for investment, which in certain sectors is still highly competitive.
A very recent survey by Ipsos for the British Property Federation conducted between 15 December 2022 and 10 January 2023, has reported that the industry remains positive for the long term. The results are based on a response from 105 British property leaders spanning owners, developers, funders, agents and advisers. It reports that 78% were confident about the UK’s economic prospects in the next five years.
Looking at the North-East region and into North Yorkshire, there are certain sectors which are still in decline, such as high street retail in some centres, but in other sectors, particularly prime City centre offices and industrial, demand remains high. Flexible working will inevitably affect demand, particularly in the office sector, but the decline in demand has not been as significant as anticipated. This new way of working is forcing many office occupiers to review their position and this often leads to new premises, and not necessarily smaller space.
From a youngsRPS perspective, operating out of our Newcastle upon Tyne City centre office across the North-East region, we have, over the last year or so, increased the volume of agency instructions in the retail, office and industrial sectors and can report a relatively strong uptake with sales and lettings being achieved, so long as a realistic pricing regime is implemented. Well-let commercial investment properties with strong tenants are in short supply and there remains a large pool of investors keen to put their money in commercial property where they still see prospects for a relatively high return and for rental and capital growth.
In addition, YoungsRPS have increased their managed property portfolio, including a new retail development in South-East Northumberland programmed to open for trade spring 2023, and which has been virtually pre-let off plan. There is still probably a bumpy road ahead for a while, but prospects in the medium to long term appear far more favourable for the commercial property industry than some commentators would have us think.
Michael Blake is a Director of YoungsRPS, operating across the North-East region and North Yorkshire out of the company’s Newcastle upon Tyne office.