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UK Commercial Property: Hard to Buy and Easy to Sell

Peter Hemple reports on the turnaround in sentiment for commercial property

The RICS (Royal Institution of Chartered Surveyors) UK Commercial Market Survey, for Q1 2014 found that tenant demand for commercial property has increased at an unprecedented rate with 52% more surveyors polled reporting higher demand from clients for space in the first quarter of this year. The increase marks six solid quarters of demand growth with the upswing particularly marked for offices and industrial real estate.

Further evidence of the increasing strength of the recovery in commercial property is the fact that demand has risen in all regions outside of London, proving that the recovery is no longer limited to the capital.

RICS data also finds that fresh demand for commercial property is outstripping supply, resulting in rising rents, with surveyors reporting four quarters of declining supply as suitable commercial space is being 'snapped up', especially office space.

Surveyors' expectations for rising rents have now hit the highest level since before the financial crisis with 12 month rental growth expectations of around 4.5% for office space, plus a 5% rise in capital values during the same period.

There has also been a sharp rise in demand for industrial space, with reported availability falling steadily since the first half of 2012. Over the next 12 months, rents for industrial are expected to grow by 5.5% and capital values by 6%.

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