Occupier demand rises in industrial sector, but falls in office sector
The commercial market remains buoyant in Scotland, with respondents expecting capital values to rise in each sector, according to the latest RICS Commercial Market Survey.
Across the country, occupier demand continued to rise in the industrial sector, but was weak in the retail market and declined in the office properties. This trend was mirrored in rent expectations, which remained strong in industrial properties, but more subdued in the office and retail sectors. Elsewhere, results were stronger from the investment market than in the occupier sector, but investment enquires rose across the board.
Across the UK, occupier demand in the quarter held steady at the headline level, with 5% more respondents seeing an increase as sentiment picks up. Looking at individual sectors, demand has increased strongly for industrial space (net balance +28%) and stabilised in the office sector, having fallen in Q2. Meanwhile, demand continued to fall for the second consecutive quarter in the retail sector.
Occupier demand rises in industrial sector, but falls in office sector.
• Rent expectations very strong in the industrial sector, weaker for offices and retail
• Investment enquiries rising across all sectors.
In terms of valuations, across the UK as a whole, a strong majority of contributors (65%) sense the market is fairly valued at present (unchanged from Q2).
RICS Scotland Director Gail Hunter said: “Scotland’s commercial sector was buoyed by the industrial market, which negated a slump in office rentals and weakness in retail. This was mirrored in rent expectations, which were strongest in the industrial market but levelled off elsewhere.
“A key issue for Scotland going forward will be how the market responds to the likely first interest rate rise in a decade next month. Given that expectations are only for a modest tightening in policy, the likelihood is that it will be able to weather the shift in the mood music. But this remains a potential challenge if rates go up more than is currently anticipated.”