Overall occupier demand for commercial property in Wales was subdued through the third quarter of this year according to the latest Royal Institution of Chartered Surveyors (RICS) commercial property monitor, and rents are expected to be flat in the short-term.
A net balance of -4% of Welsh respondents reported a fall in overall occupier demand through third quarter of 2026. Industrial space was the only subsector to see growth in occupier demand, with a net balance of 20% of respondents reporting a rise.
A net balance of -20% of respondents reported a fall in occupier demand for office space, after two consecutive quarters where this balance fell flat. A net balance of -11% of Welsh surveyors reported a fall in occupier demand for retail space which is relatively in line with the balance seen in the survey previous.
And a similar trend was seen on the investor side of the market with demand falling at all sector level through Q3 but with the industrial sector outperforming the other subsectors. There was a fall in demand from investors for both office and retail space, however investor demand for industrial space rose.
Looking ahead, respondents appear to be hesitant about the outlook overall. Respondents in Wales expect rents to fall broadly flat over the next three months. Rents in both office and retail space are expected to fall, whilst rents in industrial space are expected to rise over the next three months.
Expectations for capital values weakened further in the most recent survey, with a net balance of -21% of Welsh respondents anticipating a fall over the next three months.
Chris Sutton of Sutton Consulting Limited in Cardiff said:
“There is a squeeze in the supply of both Grade A office and industrial accommodation, with good quality enquiries struggling for options to accommodate relocation or expansion plans. There is new development in the industrial sector, mainly along the M4 corridor, supported where appropriate by the Development Bank of Wales. In the office market, developer Rightacres has successfully refurbished office floorspace in central Cardiff for several Grade A occupiers.”
Commenting on the UK picture, Tarrant Parsons, Head of Market Research and Analysis at RICS, said:
“The latest survey results point to a more challenging backdrop for the commercial property market, with the investment side bearing the brunt of higher borrowing costs following the recent rise in gilt yields to their highest levels in almost two decades. As financing conditions have tightened, expectations for capital value growth have softened, particularly in the near term.
“That said, market conditions remain far from uniform. Occupier demand has proven relatively resilient, albeit somewhat less robust than in the previous quarter. Prime offices and industrial assets continue to outperform, with respondents still anticipating rental growth and modest capital value appreciation across these segments over the year ahead. In contrast, sentiment towards secondary assets has weakened further, highlighting an increasingly pronounced divergence in performance across the market.”
