New figures have proved to property specialist Simon Morris that demand for UK commercial property has continued to rise, as supply has continued to fall.
Commercial property sales
The UK commercial property sector has recovered from the economic downturn of 2008. Statistics from HM Revenue and Customs (HMRC) indicates that commercial property transactions have increased 24% since 2008/2009, rising 6% in the previous 12 months alone to hit 115,400 sales by the end of the year to June 2015.
Nick Marshall, the principal of commercial law firm EMW has explained why commercial property sales continue to rise. He said: “Commercial property assets are proving increasingly attractive to investors looking for higher yields in an environment with record low interest rates and this is driving activity towards pre-credit crunch levels.”
Demand and supply
Recent data from the Royal Institution of Chartered Surveyors (RICS) has provided commercial property investors with more good news. These statistics indicate that business demand for UK commercial property increased in the second quarter of 2015 for the 11th consecutive quarter. In contrast, the UK’s supply of available commercial space decreased within the same three months for the ninth quarter in a row.
According to Property Wire, RICS suggested that this means that UK commercial property rents should increase at their most rapid pace since 1998. Nearly half of the survey’s respondents (46%) predicted that rents would rise rather than fall as the market moves forward.
Commercial property prices may increase
RICS chief economist Simon Rubinsohn commented on what the survey’s findings mean for UK commercial property values. He noted that “the results of the latest survey suggest the price of commercial real estate will continue to move higher over the next 12 months and quite possibly by another 10%.”
The chief economist went on to explain: “Fortunately, the strength of the occupier market is providing some underlying support for the market. Indeed, the feedback we are getting from around the country tells us that the economic expansion is continuing to broaden out with both tenant demand, and just as significantly, investor interest, rising in all areas.”
What this means for investors
These findings may lead potential investors to believe that now is the time to invest in the UK’s commercial property sector. There is a breadth of evidence to support this belief; chiefly the suggestion that commercial values will continue to rise as demand increases, whilst supply falls. However, property expert Simon Morris would warn investors to do their research before they invest funds into commercial property if they want to generate stable returns from their investment.