Retail and office vacancy rates rose at record pace amid the economic fallout of the coronavirus pandemic, new data revealed, while demand for industrial space was strong.
Royal Institution of Chartered Surveyors said on Thursday that Q4 saw the sharpest rise in retail property vacancies since its records began in 1999.
The first half of 2020 saw a record number of store closures in the UK due to the coronavirus pandemic and it is likely this trend continued into the second half amid restrictions and lockdowns.
Many office spaces also remained empty as people continued to work from home. The availability of office space saw the strongest rate of increase since the global financial crisis in 2007-2008.
Tarrant Parsons, RICS economist, said that “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,” he added.
Overall, a -27% net balance of contributors reported a fall in tenant demand, a rate that is lower than the falls reported over Q2 and Q3.
“While this might signal a small silver lining, 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 -73% and -63% respectively,” the report noted.
12-month rental projections showed no sign of improvement across retail, and similarly, expectations remain downbeat across the office sector.
Meanwhile, the industrial sector delivered the only positive outcome, with a net balance of +41% of respondents citing a rise in occupier demand.
With decreasing supply in industrial space, 12-month rental growth expectations were upbeat, with both prime and secondary industrial rents anticipate to see solid growth.
“Supported by more favourable structural dynamics, demand for industrial and logistics space accelerated noticeably over the latest survey period,” said Parsons.
WATCH: What is inflation and why is it important?