Are you curious about the United Kingdom’s commercial property market? Well, it’s quite diverse! There’s something for everyone, from office spaces to retail shops, industrial warehouses hospitality venues, and even multi-family properties. And the market is segmented not only by type but also by key cities and regions like London, Scotland, and more.
So, whether you’re a business owner looking for a new space or an investor seeking opportunities, the commercial property agents will have you covered! To help you begin with that, this article provides market size and projected estimates across all UK commercial property categories.
The Market Size of Commercial Property in the UK
The term commercial property refers to buildings that serve solely the purpose of businesses or workplaces. Commercial properties are often rented out to businesses in order to generate revenue. Buildings utilised for business reasons fall under this category. This includes places like offices, storage facilities, and shops both small and large.
The commercial real estate market in the United Kingdom has had a rough few years, with the pandemic crisis and the drawn-out Brexit discussions. Competition is fierce here. Investors, both at home and abroad, find plenty to like in the British real estate market. Despite this, the UK continues to be one of Europe’s most important commercial real estate markets.
Due to low market share concentration, the market is highly disorganised. The property technology industry is booming because it streamlines traditional real estate transactions including investing, buying, and selling.
Factors Affecting the Value of the Property Market
Significant tightening of monetary policy in the second part of last year was concurrent with a precipitous drop in buyer activity and large downward revisions in values. Several reasons, such as those listed below, are putting pressure on the commercial property market in the United Kingdom.
The Labour Market
The labour market is strong, as shown by the job growth rate of 76.0% for the three consecutive months ending in April. The previous month’s percentage was 75.9%, therefore this is an improvement. The number of individuals working, including employees and independent contractors, hit a new high during the latest quarter. The unemployment rate fell to 3.8% from 3.9% in the previous month.
There has also been a continual decline in job openings over the last 11 quarters, with a net decrease of approximately 79,000 reaching 1.05 million. Again, this reflects widespread concerns about the economy and growing costs that are preventing many companies from hiring.
Inflation Rates
After a remarkable 56% increase between the pandemic’s start and July, the manufacturing and logistics sector appeared to be starting to become excessively competitive in the midst of the more challenging lending environment. Inflation amongst consumers remained unchanged in May at 8.7%, matching April’s 13-month low.
This month’s price increases may be mostly attributed to the cost of flying, the cost of entertainment and culture, and the cost of used vehicles. However, the biggest factor in the decline was the price of petrol and other vehicle fuels.
Interest Rates
Despite the fact that the effect of recent notable financial institutions failing has been mostly controlled so far, threats remain. The housing market is also affected because of the dramatic rise in rates of interest for those with conventional variable rates, for people whose contract terms are expiring, and for people who are getting mortgages for the first time.
The Brighter Side
The rapidity with which the market recovered in the latter part of 2022, though, suggests that we may have passed the worst of it. Consistent with this view, the rate of reduction in capital values from one month to the next has slowed considerably, with a 0.5% drop in February 2023 compared to a roughly 7% drop in October alone.
Meanwhile, the occupier side of the market has shown greater stability than the investment side. Tenant demand in the industrial sector allegedly increased further in the last quarter of 2022, but investor interest from foreign as well as domestic purchasers declined across all conventional commercial property sectors.
Wrapping Up
In 2023 and 2024, rising interest rates will continue to put a strain on the finances of first-time buyers and those looking to move up to a larger home. The primary challenge for policymakers will be the potential for further pressure on the increased engagement among younger purchasers seen in recent years. However, as the office and retailing sectors continue to face structural issues, these industries may provide stronger development chances during recessions due to their strong demand and limited supply.
