Downturn Concerns Dampen London’s Commercial Property Market
09:50
The commercial property market in London is experiencing a downturn. This lead to an outlook for the market that is more subdued when compared to how the rest of the country is expected to perform. This indicates that the British capital is bucking the trend in the country which sees a rise in the demand from both occupiers and investors.
RICS or the Royal Institution of Chartered Surveyors has conducted a survey recently and has found out that of the respondents, three-quarters warned of how the market might be looking at a downturn stage. This is when compared to how the property market outside of the capital is expected to see some very positive growth especially when it comes to industrial, retail, and office rentals.
The survey has been participated by a total of 347 members of RICS’ commercial property. It has revealed that the present performance of the London commercial property market may be due to the negative sentiments concerning retail and office rent. This, in turn, has canceled out most of the positive expectations that used to pervade the industrial rent that is prevalent in the capital.
The British capital is displaying a sentiment that is based on more cautious levels. There is a weakening demand from occupiers and this has resulted in the production of negative expectations. This has also led to the increase in availability, as well as a rise in inducements.
In the investment markets, RICS stated that the trend seems to show more resilience. However, when it comes to headline capital expectations, the forecasts are somehow flat at present. The market in central London has the highest number of respondents in the survey that view the properties sold there to be overpriced, with the statistics clocking at 67%.
Chief economist of RICS, Simon Rubinsohn, said that the momentum in the capital for the occupier market is being seen as challenging. This is when compared to other parts of the country. Meanwhile, rents in the capital are remaining under reassure from the industrial market. The same is being mirrored with concerns in valuations as about two-thirds of the respondents view the market in London as expensive.
It is noteworthy to consider though that foreign investors still continue to see London as an attractive setting and home for investment. This is especially true with the real estate condition in the city in general as well as the office sector.
Rubinsohn further stated that the dilemma that needs to be resolved moving forward has to do with the response of the market to the likely increase in the interest rate next month. This is the first to happen in a decade. The expectation about the moderate policy tightening is that it should help weather the mood shift. Still, this should be viewed as a potential challenge especial in the event that rates will further increase than the figures that have already been predicted.
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