Surveyors in Northern Ireland remain cautious about the commercial property sector, amidst rising uncertainty, fiscal tension and softening demand for office space, according to the latest Royal Institution of Chartered Surveyors (RICS) commercial property monitor.
Whilst overall occupier demand for commercial property edged up in Q3, this was driven by demand for industrial space, with demand for retail space flat and demand for office space seen to be falling (a net balance of -22% of respondents indicated a fall in occupier demand for office space).
Looking ahead, NI surveyors expect rents for office space and retail space to decline again over the final quarter of the year in contrast to their expectation that industrial rents will increase sharply. A net balance of 38% of surveyors in NI anticipate rents for industrial space to rise, whilst a net balance of -11% of respondents expects rents for office space to decline, and a net balance of -13% of respondents expects rents in the retail space to fall.
Regarding capital values, a net balance of -3% of NI surveyors expects them to fall through the final quarter of the year. Looking at the subsectors, the industrial sector continues to outperform the others on this front too, as a net balance of 30% of respondents anticipate industrial sector capital values will rise over the next three months. A net balance of -31% expects capital values to fall in office space, whilst a net balance of -10% of respondents expects capital values to fall regarding retail space.
Over the next 12-months NI respondents expect both rents and capital values to be marginally higher overall. However, again they expect this to be very much driven by the industrial sector. Indeed, office and retail are expected to see rents and capital values fall back further in the year ahead.
Garrett O’Hare, RICS NI commercial property spokesperson, says:
“The latest Commercial Property Monitor illustrates that outside of the industrial sector, we are continuing to see reduced market activity with occupier and investor demand for office and retail space experiencing reductions this quarter. Whilst this continues a longer-term trend, we are potentially seeing some additional caution in some subsectors due to economic factors such as above-target inflation, and fiscal policy uncertainty. Landlords remain under pressure to offer increasingly generous incentives as vacancy rates continue to move higher.”