DEMAND for industrial space in Scotland continues to increase but the availability of vacant office and retail space is rising at the strongest rate in over a decade, according to new research.
The findings were revealed in the latest RICS UK Commercial Market Survey.
A -34% net balance of Scottish contributors reported a fall in tenant demand. While this rate is lower than the falls reported over Q2 and Q3, RICS said that when looking at individual sectors, the rate of decline has not shown any signs of easing in the retail and office sectors, which posted net balances of -79% and -68% respectively.
The industrial sector delivered the only positive outcome, with a net balance of +44% of respondents citing a rise in occupier demand.
Alexander Burrell of Moray Council, based in Elgin, said, “Office and retail demand continues to contract and, given other market factors, is unlikely to recover to pre-Covid levels. Industrial is still growing partly due to additional space demand for Covid safe operations and partly from new start businesses. Consultation with tenants suggests a mixed picture with some barely coping whilst some are seeing growth.”
Alan Creevy of CDLH in Glasgow commented, “Retail, office and hospitality values have been hit, but not as badly as expected However, values are likely to come down further through to the second half of 2021.”
Tarrant Parsons, RICS economist, said, “With the UK economy facing a further setback towards the end of the year, hampered by a renewed tightening in restrictions, it is unsurprising that conditions remain challenging across portions of the commercial real estate market. Both the office and retail sectors continue to see occupier and investor demand diminish, with expectations for rents and capital values remaining deeply negative for the time being. Having said that, the industrial sector seems to go from strength to strength.
“Indeed, supported by more favourable structural dynamics, demand for industrial/logistics space accelerated noticeably over the latest survey period. As a result, already positive rental growth projections across the sector were revised higher in the Q4 results.”
