RICS: Prices will rise as supply shortfall bites

Ryan Bembridge

January 26, 2016

Commercial property prices and rents will rise over the next 12 months as the lack of housing supply continues to bite, Royal Institution of Chartered Surveyors members have predicted.

The RICS UK Commercial Property Market Survey found that nine in 10 (87%) members expected prime industrial rents to rise over the next 12 months.

Most also expected an uplift in prices, although four in five (81%) said the cost of commercial real estate in Central London is overpriced.

Andrew Lloyd, managing director of Search Acumen, said: “Supply remains a key issue: the capital is facing more rent increases in 2016 with office vacancy rates hitting a 15-year low and new investor favourites like Cardiff, require a lot more high quality office space than is currently in the pipeline; its grade A space already expected to be fully let by early 2016.

“A steady stream of deals is likely to keep commercial property lawyers busy in early 2016. Sorting out the backend to be as efficient as possible, however, could differentiate the haves from the have-nots for the rest of the year.”

Simon Rubinsohn, RICS chief economist, added: “For the time being the real estate sector seems largely insulated from the turmoil affecting financial markets. Indeed, the prospect of a ‘low for longer’ interest rate environment provides further comfort for those parts of the property market where values are looking a little stretched and arguably more vulnerable to a material shift in monetary policy.

“One potential consequence of the current climate is that the trend in foreign investment could slow which is a pattern the latest RICS survey seems to be picking up. However, with the economy still set to post growth in excess of 2% in 2016 the backdrop for the occupier market appears reasonably well underpinned.”

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