Photo: Luke Hayter
The amount of available office space in the UK has fallen for the past six quarters in a row, according to the Royal Institution of Chartered Surveyors,
The latest RICS commercial market survey reveals that demand for office space and conversions from commercial to residential purposes has seen availability plummet steadily for the past year and a half.
The UK is racing to close the shortfall in residential property supply, which now includes some office space, as permitted development rights help in a small way to boost supply through conversions. The RICS warns, though, that it is also having the unintended consequence of contributing towards a shortfall of office space in some parts of the country. Indeed, availability of office space is now decreasing at its fastest rate since the late 1990s.
The rise in transactions of commercial properties being sold with Permitted Development Rights (PDR) appears to be compounding the lack of availability, with 2/3rds of respondents to the survey suggesting that if PDR exemptions are not extended then availability of commercial properties will be impacted further.
In London, 20 per cent of respondents said PDR transactions had led to more than 10 per cent of available commercial properties being earmarked for conversion into residential use and a net balance of 51 per cent of surveyors reported a rise in demand for office, industrial and retail space.
Across the whole of the UK, 32 per cent more surveyors said availability across office, retail and industrial properties had fallen, while demand had risen to a net balance of 44 per cent. Significantly, demand for industrial property grew on the previous quarter and surveyors in London also saw a large rise in prospective overseas investors in the industrial sector (73 per cent).
The picture across the UK appears increasingly upbeat, with the firmer tone spreading beyond the capital as the economic expansion gains greater traction. This is being reflected in rental expectations which are now in positive territory in all parts of the country in the office and industrial sectors.
Simon Rubinsohn, RICS Chief Economist, commented: “The Q3 results provide further evidence that the economic expansion is becoming more broadly based with tenant demand for space picking up in all parts of the country and the need for landlords to provide inducements diminishing. There are also now clear signs that investors are casting their nets wider in a bid to find better value in the market following the steep drop in yields on prime property in the capital.”
Source: The Movechannel