RICS Commercial Market Survey

• Both demand and available space stabilise in Q1, but rent expectations remain in negative territory
• New development still falling, but at the slowest pace since 2007
• Little change in investment enquiries, but capital values still expected to ease in the near term

The latest RICS UK Commercial Market Survey shows there was little change in overall activity during the first quarter. The net balance readings for both occupier demand and available space broadly stabilised, resulting in slightly tighter market conditions compared to last quarter. As such, there was a small improvement in the rental outlook; rent expectations remain negative, but less so than in the previous quarter. Surveyors in many parts of the country are continuing to suggest that occupiers are remaining cautious with regards to new letting activity.

At the headline level, occupier demand and available space were largely unchanged in Q1, at +3 and +4 respectively, suggesting a relatively flat quarter for activity. However, the rental picture has yet to materially improve - or even stagnate - with expectations easing in the short term. On the investment side, enquiries to purchase also stabilised, while future activity is set to pick up slowly in the coming three months.

The results suggest there are fewer development projects in the pipeline, as new starts are continuing to fall. They are, however, declining at the slowest pace in five years. Moreover, capital values are still expected to ease further at the national level; 9% more surveyors expect them to fall rather than rise in the coming quarter.

At the sector level, demand for space fell in the retail sector, while it stabilised for offices and increased for industrial space. Available space continued to rise for office and retail units, but showed modest declines for industrial - the first such reading since 2005. In the industrial sector, rents are stabilising following several consecutive decreases. Rents are still expected to decline for office and retail units.

On the investment side, only the industrial sector saw new enquiries and capital value expectations stabilise this quarter, with the net balances just edging into positive territory. There were declines for the office and retail sectors, though at a lesser pace than in last quarter. 

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