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  • Writer's pictureAlex Shairp

REVIEW OF THE UK COMMERCIAL PROPERTY MARKET IN JUNE 2024


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WELCOME TO THE JUNE 2024 EDITION OF OUR 'UK COMMERCIAL PROPERTY REVIEW'


 

COMMERCIAL TRENDS OF 2024


Flexibility, sustainability and diversification are key trends in the commercial property market so far this year, according to PropertyWire.

 

Flexible workspaces are increasingly in demand, reflecting the shift to hybrid working since the pandemic. Co-working spaces, quality buildings and adaptable offices are more popular, as are those in prime locations.

 

Sustainability continues to be a priority, prompting landlords and developers to adopt eco-friendly practices. Eden, a new sustainable office space in Salford, is one of the developments leading the way; the 12-storey, 115,000 sq. ft building was designed to meet net zero targets. Features include air source heat pumps, a rainwater harvesting system and energy efficient lifts.

 

Logistics and distribution centres are in demand due to the upturn in e-commerce. As the online retail market grows, high street units are having to diversify their offering to become more than just shops; some are now incorporating experiences, entertainment and restaurants.


 

LONDON LACKING BIG DEALS


April was another quiet month for the City investment market, according to Savills.

 

At the end of April, the year-to-date turnover was £474.3m across 25 deals – 77% down on the previous year and 79% lower than the five-year average. Interestingly, the number of deals was only 18% less than the five-year average, indicating that fewer larger deals are bringing down the turnover volumes. In fact, the City has not had a deal above £100m so far this year.

 

With a muted market, Savills believes investors could use this opportunity to take advantage of reduced competition, commenting, ‘It seems the time is ripe for investors to act on big ticket deals in London. By making the most of the market dynamics, unlocking undervalued assets, and harnessing historical insights, investors can position themselves to take advantage of this ever-evolving market landscape.’


 

INDUSTRIAL AND RETAIL OUTPERFORMING THE OFFICE SECTOR


CBRE’s Monthly Index for April highlights that there is a positive outlook for the retail and industrial sector, while the office market experiences some challenges.

 

The report found that, in April, retail capital values increased by 0.1%; standard shops were a key driver of this, recording 0.2% capital growth. Also, retail warehouse capital values rose by 0.1% and, for the first time since April 2023, shopping centre values did not decrease.

 

As for the industrial sector, capital values were up 0.3% in April, with the South East region performing particularly well compared to the rest of the UK.

 

The office sector did not fare so well, with total returns at -0.1%. Capital values of Outer London/M25 offices fell by 1.2%, causing a monthly decrease of 0.6% overall. However, office rental values did increase by 0.1%.

 

Jennet Siebrits, Head of UK Research at CBRE, reflected, “Industrial and retail performance is a source of optimism for UK real estate investors. Both sectors exhibit steady rental growth, particularly industrial and have reported positive total returns in every month so far in 2024.”


 

Please get in touch if you would like advice or information on any of the areas highlighted in this blog about the UK property market.



 

It is important to take professional advice before making any decision relating to your personal finances. Information within this blog is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK. We cannot assume legal liability for any errors or omissions it might contain. No part of this blog may be reproduced in any manner without prior permission.

 

All details are correct at time of writing – 19 June 2024.


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