UK Commercial Real Estate Market - Q1 2023
The UK commercial real estate market is currently experiencing a mix of sentiments, with certain sectors performing better than others. The office sector, which has historically been a strong performer, has seen a reduction in demand due to the COVID-19 pandemic and the rise of hybrid working. As a result, we have seen a flight to quality as vacancy rates have increased in secondary assets.
The retail sector has been hit hard by the pandemic, with many retailers struggling to survive and a significant increase in the number of empty storefronts. However, there has been a slight uptick in demand for retail space as consumers return to physical stores.
The industrial and logistics sector has seen increased demand due to the rise of e-commerce and the need for warehousing and distribution centers. This has led to an increase in rental prices and a surge in investment activity in this sector. Albeit disparity on pricing between vendors and purchasers in the secondary market still persists.
Investor sentiment has also been mixed, with some investors taking a cautious approach due to uncertainty around the pandemic and Brexit, while others see opportunities for value investing in the current market.
Overall, the UK commercial real estate market is in a state of flux, with some sectors struggling and others thriving. As the UK navigates its post-Brexit future, and deals with high inflation, opportunities will present themselves, and it will be interesting to see how the market evolves. What is clear is that rental growth, good EPC’s and investing in ESG improvements will be key to driving performance.