RICS Commercial Property Market Survey (Q4) - Capital Economics
UK Commercial Property

RICS Commercial Property Market Survey (Q4)

UK Commercial Property Data Response
Written by Prohad Khan
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The RICS survey for Q4 showed that occupier demand and investment enquiries continued to fall. Though there was a slight improvement on Q3, this was largely due to the industrial sector. And expectations for all-property rental and capital values remain firmly negative.

Apart from industrial, the outlook for property values remains poor

  • The RICS survey for Q4 showed that occupier demand and investment enquiries continued to fall. Though there was a slight improvement on Q3, this was largely due to the industrial sector. And expectations for all-property rental and capital values remain firmly negative.
  • The RICS Commercial Market Survey showed that occupier demand remained in negative territory in Q4. A net balance of 27% of surveyors reported a deterioration in occupier demand, compared to 33% in Q3. (See Table.) Despite the small improvement in the balance, this still meant that occupier demand weakened in Q4. The sector disparity widened as industrial rose to its highest balance since Q4 2015, with a net 41% noting a rise in demand in Q4. Meanwhile, retail and offices stayed in negative territory at minus 78% and minus 63% respectively. At the same time, while surveyors noted that availability for industrial fell further, retail availability rose to its highest balance on record, pointing to downward pressure on rents.
  • Meanwhile, investment enquiries rose from minus 27% in Q3 to minus 12% in Q4, its best outturn since Q4 2019. This was consistent with a pick-up in investment deal totals from the previous quarter and while all sectors reported an improvement, industrial remained the only sector in positive territory.
  • Looking ahead, expectations for capital and rental values remained weak in the retail and office sectors, while industrial continued to improve. (See Chart 1.) A net balance of 26% of surveyors expect a decline in capital values in Q4, compared to minus 39% in Q3. This was boosted by the balance of 43% of surveyors expecting a rise in industrial capital values, which was significantly higher than the 19% balance in Q3. Notably, retail expectations were unchanged in Q4, at minus 83%.
  • On balance, the survey still points to notable falls in rents and capital values this year. While the outlook for industrial continues to improve, surveyors remain downbeat on offices and retail. And given that restrictions will ease only gradually after March, sentiment could deteriorate again in Q1.

Chart 1: RICS Surveyors Expecting a Decline in Capital Values (% Net Balance)

RICS Commercial Property Survey – Key Balances (%)

Not seasonally adjusted

2018

2019

2020

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Past investment enquiries

12

-3

4

-9

-15

-9

-15

-11

-14

-46

-27

-12

Past occupier demand

0

-8

-9

-13

-13

-13

-19

-12

-24

-55

-33

-27

Past availability

2

6

8

12

16

17

18

14

15

26

32

26

Expected rents in the next quarter

3

-2

-2

-7

-9

-7

-11

-3

-29

-49

-37

-30

Inducements

9

16

11

21

22

23

22

23

29

40

39

43

Expected capital values

9

1

2

-12

-9

-7

-15

-3

-35

-51

-39

-26

Source: RICS


Prohad Khan, Property Economist, prohad.khan@capitaleconomics.com