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Shifting Commercial Property Landscape and Town Centres Opportunities

Andrew McDonald MRICS MIPM FRSA, a Chartered Surveyor with close to 30 years of experience in the commercial property market, comments

To many, ‘commercial’ is a more mysterious and opaquer proposition than dealing in residential property, with its inherent familiarities making the housing sector a more decipherable asset class. Operating in the commercial market means entering a world requiring a great deal of research to comprehend the nuances, language, terminology, and technicalities. After all, apart from the most initiated who has any idea of turning circle requirements in the industrial property market?

Until recently, the market had been broadly limited to three main commercial sectors: retail & leisure; offices & business space; industrial. While it may have taken time to decipher the workings of each, once a certain level of comprehension was acquired, then a working basis for property appraisal had been established.

Not so, nowadays. A myriad of factors have altered our relationship with commercial property, both as an investment class but also our daily interactions as a ‘consumer’ of commercial real estate. We all know we’re spending less time in our offices and less time pounding the shopping pavements in many of our retail centres. With reduced activity in these sectors there has been a decline in occupier demand and, as such, a downward pressure on rents. Commercial property purchases, unlike residential, are almost always an economic lead decision. Investors chase stock with a resilient future, knowing they have a safe asset born from solid occupier demand.

But this is no longer the case and as such we are in a market of high uncertainty. This makes for great buying opportunities, but also potential banana-skins for the uninformed.

It’s no secret that retail property has felt the effects of the online shopping growth, with a slow decline in fortunes since the internet was switched on. All involved in the commercial markets will have their own view of when this gradual decline became more sudden - to me this was just after the Brexit referendum of 2016. Add COVID and lockdown into the mix and we are where we are. In broad terms, we simply have too much ‘physical retail’ in our town centres. High streets expanded over time to account for multiple retailers who would typically look for space in most viable towns within the UK. This has changed, and retailers have retracted. A mass market fashion retailer may, a decade or so ago, had requirements for shops in 300 locations. This may now be limited to 30 or so towns. The rest of the consumer demand can be satisfied online. 

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