Skip to content

Press release

26 APR 2018

Online shopping causing growing divide

The divide in the commercial property market between retail property and the industrial sector is growing, according to the Q1 2018 RICS UK Commercial Property Market survey.

The weakness in retail appears to be spreading across prime locations, with a challenging backdrop being reported across the whole of the UK.

Survey highlights

  • Growing divide between retail and industrial property.
  • Declining tenant demand and rising availability in retail sector with weakness spreading to prime locations.
  • Industrial demand still solid while offices see marginal improvement.
  • Investment enquiries still rising but overseas interest flattens.

Occupier demand

While occupier demand at all property level was unchanged in Q1, the sector breakdown shows demand for industrial space still rising, with 31% of respondents noting an increase. This contrasts sharply with retail, in which demand not only declined further but at an accelerating rate. A net 43% of respondents saw a fall in demand for retail property, which is the weakest reading since 2009.


As demand for retail property dropped, availability in the sector rose significantly in Q1, with 43% more respondents noting an increase (as opposed to a decrease). Retail landlords also raised the value of incentive packages to entice clients for a fourth consecutive quarter. This in contrast to a decline in the availability of industrial space.

Are rents growing?

Looking at rent growth expectations over the next three months, the same split is visible with contributors expecting to see downward pressure on retail rents growing, alongside rising near term rent predictions in the industrial sector. The negativity across retail is pulling down the headline average for rent growth expectations, with just 3% more respondents predicting a rise rather than fall over the next three months, the lowest since Q2 2016.

Rents in detail

Looking at the sector in more detail, secondary retail rents are projected to decline in all parts of the UK over the coming year, while the outlook is patchy at best for prime retail sites. Both prime and secondary industrial markets continue to display stronger rental projections over the year than all other sectors.

On a twelve-month view, 24% more respondents predict a fall in prime retail rents, while a net balance of -54% are predicting a fall in secondary retail. The outlook for prime office rents appears comfortably positive (net balance +38%), although expectations remain flat for secondary.

Foreign interest flat for now

Turning to trends in the investment market, headline enquiries rose for a seventh successive report, with investor demand increasing strongly for industrial assets, marginally for offices, but falling in the retail segment. Interest from foreign buyers meanwhile was flat across all sectors during Q1. The supply of property for investment purposes continued to decline in the industrial and office sectors. Retail again bucked the trend, with supply increasing.