Uncertainty over Brexit hits the commercial property market

THE ongoing uncertainty surrounding the Brexit negotiations is taking its toll on the commercial property market in Wales, according to latest research from the Royal Institution of Chartered Surveyors (Rics).

Its Q3 commercial property market survey shows occupier demand falling in Wales for the first time since early 2013.

Falling demand from potential occupiers in the retail sector is the key factor in the overall drop in occupier demand, though a slowdown regarding office space is also evident. The picture for the industrial sector is more positive.

Surveyors point to the uncertainty being caused by the Brexit negotiations as a factor impacting on the market, leading to some hesitancy by potential tenants.

Welsh respondents were also the most likely to say in the survey that they had seen evidence of firms looking to relocate away from the UK in response to Brexit (56% of respondents said that they had).

And they were the most likely to say that they expect to see an increase in firms relocating away in the next two years (78% said that they expect to).

While data regarding investment enquiries remained relatively upbeat during the quarter, suggesting that potential investors in commercial property in Wales continued to be active, the outlook is less upbeat.

Respondents expect capital values to come under pressure in the three-months ahead, particularly in the retail sector.

Chris Sutton, Rics commercial property spokesperson in Wales and lead director at JLL Cardiff, said: “Demand for investment stock remained relatively strong in the quarter, particularly for well-let prime assets.

“Cardiff remains the focal point for new investors looking at Wales and has attracted new UK funds and overseas investors.

“There has been a slowdown in the number of enquiries for office and retail floorspace although the industrial market continues to perform more strongly.

“No doubt Brexit uncertainty is one factor affecting the market, alongside the ongoing transformation in retail.”

Peter Graham of Gerald Eve in Cardiff said: “There is more uncertainty in the market, but there is still keen property demand, although this is getting more selective”.