Demand for industrial space is outstripping supply – report

DEMAND for industrial property space in Wales is significantly outstripping supply, according to latest research from the RICS (Royal Institution of Chartered Surveyors).

Chartered surveyor respondents are reporting increases in occupier demand for industrial space and falling availability. They are also pointing to strong rises in interest from investors to purchase industrial property assets.

As a result, both rents and capital values in the sector are expected to keep rising in the three months ahead.

This is contrast to the retail sector, where occupier demand is reported to have been falling, and investor interest flat. As a result, short-term rent and capital value expectations in the retail sector have declined, according to the balance of surveyors.

Whilst there is variation between sectors, overall the commercial property sector in Wales remains stronger than other parts of the UK, according to the survey. Like the industrial sector, office continues to perform well, with occupier demand and investor interest rising and expectations for rent and capital values in the three-months ahead still positive.

Chris Sutton, RICS commercial property spokesperson in Wales, said: “With growth in ‘last-mile’ logistics and steady demand from trade counter operators, the industrial sector has been very buoyant. This has mirrored activity in the capital markets with multi-let industrial investments in demand.

“In terms of the office sector, the announcement of the 266,000 sq ft public sector hub for HMRC in Central Square, Cardiff, is the largest office pre-let ever agreed in Wales and this has given a further boost to the Central Cardiff Enterprise Zone.”

The main findings of the survey were:

A net balance of 20% of respondents reported occupier demand (all sectors) being up in the first quarter. Demand for industrial space was particularly strong (+40%);

The balance of respondents (-17%) indicated that availability of commercial property space fell. This was driven by the fall in availability of industrial space;

The net balance for three-month rent expectations was -19%, meaning that 19% more surveyors expect rents to rise than fall. This was driven by increased sentiment in the office and industrial sectors;

Investment enquires were up according to a net balance of +17% of respondents. However, there was variation at a sector level with investment enquiries for industrial and office space rising and flat for retail accommodation;

The net balance for three-month capital value expectations was +20% with capital value expectations in the industrial sector particularly strong.