RICS, in its latest Commercial Property Monitor, noted that while the office and retail sectors continue to face challenges, sentiment has seen a positive shift since Q3. Industrial demand, while still positive, has experienced a decline from previous highs.
Prime properties continue to outperform secondary units. Prime retail rents, for instance, have stabilised, with the 12-month expectations net balance improving from -13% in Q3 to -4%. This marks the most optimistic view on prime retail rents since Q1 2018, indicating positive momentum.
Regionally, the national trend is mirrored across most parts of the country. London, however, stands out with strong rental expectations in prime office and retail markets, both firmly in positive territory. In contrast, secondary office space in the capital is facing increased pressure. The Midlands, particularly in the industrial sector, shows notable strength.
Despite these positive nuances, overall investment demand remains relatively soft. The all-property investment enquiries indicator reports a net balance reading of -19%. Similarly, overseas investment enquiries have declined across all sectors in Q4. Last year, RICS has called for a national real estate roadmap that attracts foreign investment on a broad scale, providing holistic benefits to the entire economy, as outlined in its Manifesto for the Built Environment.
Credit conditions, on the other hand, have seen a notable improvement in sentiment, with a much flatter -5% reading compared to the significantly more negative -44% and -75% seen in Q3 and Q2, respectively – a shift that suggests a more stable credit environment in the commercial property sector.