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FT Commercial Property law

Steep Rise in Commercial Property Demand

Many clients of the commercial property services of Farani Taylor will note with interest the latest RICS commercial market survey, which indicates an increase in demand for this category of property at almost its fastest pace since 1998, leading to significantly heightened investment in new projects.

Nor was the recovery in demand restricted to London, the statistics showed. Nonetheless, when surveyors looked ahead, they anticipated that the office sector would be strongest, with the capital playing the leading role, despite prime property valuations in the city having brought increasing concern.

Particularly notable is the increasing confidence that secondary space will also see the benefit of the more positive mood in the market, with rents and capital projections making pleasant reading everywhere. The survey documented the first part of 2015, and saw accelerating demand for commercial properties for the 10th quarter in a row, as 46% more respondents saw heightened interest.

There was also a notable rise in enquiries in the investment market. 49% more surveyors reported seeing a greater number of budding investors, continuing a trend of increasing demand that can be traced back to late 2012. Interest from overseas buyers was also up on the last quarter, the 34% more respondents who experienced more enquiries from international investors comparing to the previous survey’s 17%.

Coinciding with this was a fall in available space, helping to place rental expectations at a level not seen since 1998. It was in the industrial and office sectors where this trend was especially evident, with retail rental expectations remaining somewhat lower.

RICS Chief Economist, Simon Rubinsohn, commented: “The strength of the latest commercial property survey suggests that the underlying momentum of the economy will continue to accelerate through the course of this year.”

He described “a better tone to the results” as “particularly encouraging”, adding that it was discernible in every area of the country and more and more in secondary, not just prime space. He concluded: “Given that these indicators have historically provided a strong steer as to the performance of the economy two to three quarters out, it is hard not to be encouraged by the conclusions of this report.”

Investment strategies are being impacted by insufficient supply, with the long-viewed ‘alternative’ asset class of student accommodation becoming progressively mainstream and such other alternative property sectors as service apartments and retirement living seeing consolidation due to the healthy yields that they promise.

Amid shifting market trends, prospective purchasers will need to stay agile in their search for the best opportunities, which they can be helped to do with the right commercial property solicitors – like those of Farani Taylor – by their side.

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