The latest RICS research highlights a mixed landscape for commercial property in Wales during the third quarter of 2024.
- Occupier demand for industrial spaces has shown an increase, providing a bright spot in an otherwise flat market.
- Retail spaces in Wales are experiencing a drop in demand, signalling challenges ahead for this sector.
- Despite a downturn in investor demand for commercial properties, there are indications of gradual improvement.
- Future expectations hint at growth in industrial property values, though other sectors may not see similar gains.
The recent RICS report reveals that the Welsh commercial property market remains largely stagnant, with varied performance across its sub-sectors. While the overall occupier demand has not shown significant growth, industrial spaces have bucked the trend, witnessing a positive net balance of 25%. This indicates a strengthening interest in such properties, even as other areas like retail struggle.
The demand for retail spaces has notably decreased, with a net balance of minus 23% reported by Welsh surveyors. This decline suggests that retail properties are facing hurdles that could impact future investments and growth within this sector.
Despite the overall drop in investor interest in Welsh commercial real estate, reflected in a net balance of minus 8%, this is an improvement from the previous quarter’s minus 19%. Notably, industrial properties continue to attract investor enquiries, unlike office and retail spaces which saw declines.
Expectations for capital values over the next three months remain cautious, with a net balance of minus 9% predicting a fall. However, industrial spaces are expected to see growth, whereas retail and office spaces continue to face a lukewarm outlook.
Rental expectations mirror the capital value trends, with industrial rents expected to rise. In contrast, both office and retail rents are anticipated to decline further, reflecting the ongoing challenges within these sectors.
Expert insights attribute part of the market’s performance to extended transaction slowdowns, influenced by recent political events and budgetary planning. Chris Sutton highlights the strong growth in industrial rentals along the M4 corridor and points to challenges faced by lower-grade office spaces.
Looking at the broader UK context, RICS senior economist notes that while the commercial property market is performing underwhelmingly, optimism persists due to an improving lending environment and potential for modest growth in property values and rents.
The Welsh commercial property sector displays distinct trends across different sub-sectors, with industrial spaces showing promise amidst broader market challenges.
