Our monthly property market review is intended to provide background to recent developments in the property markets as well as to give an indication of how some key issues could impact in the future.
TRUE IMPACT OF THE PANDEMIC YET TO BE FELT
According to Derwent London (property investor, developer and landlord in the capital), the real impact of the pandemic on the office market is yet to be felt. With job losses and business failures likely to increase over the next few months, office vacancies will also rise and place pressure on rents, which look likely to fall as a result.
UK RETAIL RECOVERY UNLIKELY FOR SOME TIME
The most recent ‘UK Retail Monitor’ from Knight Frank for Q2 2020, highlights the continued plight of the retail sector in the UK. Closure of all but essential retail, understandably caused sharp declines in values and volumes. Interestingly, high streets and shopping centres experienced footfall declines between -88% and -65%, but due to their accessibility by car and large store formats facilitating social distancing, retail parks experienced lesser footfall declines (April -63%, May -55% and June -34%). Consumer confidence fell sharply between Q1 and Q2 2020 (-34), with only a marginal recovery (-27) by the end of Q2.
INDUSTRIAL SECTOR STILL DISPLAYS RESILIENCE
Although rental expectations over the next twelve month period for prime and secondary office space, and primary and secondary retail rents, are negative, the recently released UK Commercial Property Survey for Q2 2020, highlights that sentiment is much more resilient across the industrial sector. Despite rents in secondary locations falling by around -1% in the next 12 months, prime industrial rents continue to display a positive outlook, with respondents to the quarterly survey anticipating growth of just under 2% over the next year. This outperformance for the industrial sector is evident in respondents’ expectations at both regional and national level.