UK businesses are predicted to face further financial pressures, with commercial rents expected to rise by 4% on average over the next 12 months, the Royal Institution of Chartered Surveyors (RICS) has warned.
RICS’ UK Commercial Market Survey for the third quarter of 2015 reveals that businesses within the office and industrial sectors are likely to experience the most significant rental increases over the next 12 months, at around 5% and 4.25% respectively, with London being the worst hit region (6%).
Demand for commercial properties continues to rise among both renters and investors, with improvement continuing across the UK. The survey reveals that 40% of respondents had seen an increase in rental or occupier demand over the last quarter, with the strongest growth reported in the industrials sector where 49% of respondents reported a rise.
Simon Robinson, RICS chief economist, said: “While for individual businesses, the rise in rental values might not be particularly welcome, as a bellwether for the UK economy, the survey highlights some very reassuring growth patterns.
“Nationwide, we’re seeing a solid increase in demand for commercial properties across retail, office and industrial sectors. In other words, at the moment, however badly rental costs might pinch, they do not appear a barrier to growth.”
RICS said availability of leasable commercial space contracted over the last three months, marking the 10th consecutive quarter of declining supply and placing upward pressure on rents and capital values.
Commercial property values are expected to continue to rise relatively strongly over the next 12 months. Retail property is projected to remain the back-marker relative to office and industrial property with London still set to post the strongest gains Interest from foreign buyers increased steadily with a quarter of respondents nationally reporting an increase.