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RICS Commercial Market Survey, Wales, Q3 – Commercial Property Sentiment Recovers


The commercial property market in Wales is showing a return to a more positive mood post the EU vote, however development starts continue to fall in a market where supply is already tight, according to the Q3 RICS Commercial Market Survey 2016.

Rent and capital value expectations improved following a deterioration in the immediate wake of the Referendum. 17 percent more Welsh respondents expect rents to rise over the next three months (compared with a reading of 1 percent in Q2). 12 percent more respondents expect capital values to rise over the same period (compared to -9 percent last quarter).

Investment enquiries saw a marked improvement in the quarter, according to the survey. 26 percent more Welsh respondents saw an increase in investment enquiries in Q3, compared with a reading of -28 percent in Q2. This rebound was evident across all sectors of the investment market (office, retail and industrial), and was also evident in enquiries from foreign investors, with 13 percent more Welsh respondents seeing a rise in enquiries from foreign investors, compared to -28 percent in Q2.

Occupier demand also edged up in Q3, with 18 percent more Welsh respondents reporting a rise in demand at an all-sector level (compared with a reading of 10 percent in Q2). This modest improvement is mostly driven by the office sector, with 25 percent more respondents reporting a rise in demand for office property in Wales.

However, there is no pick-up evident in new development activity, according to the survey. The balance of Welsh respondents (-7 percent) saw a decline in development starts in Q3, following a similar fall last quarter – the first since the end of 2013. This is in a market where supply is already tight, according to surveyors, with the reading for availability of space in negative territory for the tenth consecutive quarter, albeit now marginally so (-1 percent).

Chris Sutton, RICS Commercial Property Spokesperson in Wales, said:

“The more negative mood in the Q2 survey reflected the fact that it was conducted in the immediate aftermath of the referendum. The latest results for Q3 suggest that the commercial market has subsequently settled down, which is broadly consistent with much of the other macro news flow that has emerged over the past few months. On the occupational side, the office market continues to be the strongest performer in Wales; and Cardiff, as a genuine UK regional centre, continues to be the driver of the Welsh commercial property market.

Following the Brexit vote, capital markets are broadly back to ‘business as usual’; albeit the longer-term implications of Brexit will take time to unravel. And until we have clarity on future market access, short-term investment decisions may be delayed. However, the RICS results do suggest that the drop in the pound is encouraging foreign investors to show interest in the UK market, and it will be interesting to see if the pick-up foreign investor enquiries in Cardiff continues to increase.”