Occupier and investor demand for commercial property in Wales was lower through the second quarter of the year according to the latest Royal Institution of Chartered Surveyors (RICS) Commercial Property Monitor.
Whilst surveyors remain optimistic on the outlook, it is less so than seen previously, RICS added.
A net balance of -13% of Welsh surveyors reported a fall in overall occupier demand through Q1 2025, down from 7% seen in Q1. Looking at the subsectors, demand for industrial space fell flat, whilst demand for retail and office space was reported to have declined (net balances of -13% and -27% respectively).
Looking at investor demand, a net balance of -18% of respondents in Wales reported a decline overall, down from 5% seen in the survey previous. Looking at the subsectors, industrial space outperformed the other others with a net balance of 8% reporting a rise. Surveyors in Wales note that investor enquiries for both retail and office space declined (both net balances of -31%).
Regarding capital value expectations over the next three months, surveyors in Wales expect a fall (a net balance of -14%), moving further into negative territory than was seen in Q1 (a net balance of -6%). Looking at industrial space, capital value expectations fell for the first time in two years, with a net balance of -14% of Welsh respondents anticipating a decline. Retail and office capital values are also expected to fall over the quarter (net balances of -21% and -7% respectively).
Surveyors in Wales are more optimistic on the 12-month outlook for capital values, although less so than seen previously. A net balance of 7% of respondents expect capital values to rise at all sector level, down from 13% seen in the survey prior.
With regard to rental expectations, surveyors expect rents fall over the next three months (a net balance of -4%). A net balance of 7% of Welsh respondents anticipate that rents will rise for industrial space, whilst a net balance of -20% expect rents in retail space to fall, and rents in office space are expected to fall broadly flat.
On the 12-month horizon, surveyors in Wales expect overall rents to rise. Similar to that of capital value expectations, surveyors remain optimistic that there will be an increase, albeit lesser than seen previously, falling from a net balance of 18% in Q1 to a net balance of 8% in Q2.
Chris Sutton of Sutton Consulting Limited in Cardiff said:
“There is a lack of Grade A floorspace across both office and industrial markets which will hold back the Welsh economy. This is due to a range of factors, including increased construction costs, which have reduced viability. There is an opportunity for the public sector to facilitate new development through a focus upon the allocation and servicing of ‘shovel ready’ sites, improving the planning process and direct support where appropriate.”
Stephen Anthony Myers of Rombourne Ltd in Cardiff added:
“There is an overall decline in occupier demand in both the office and industrial markets in South Wales. It is also taking much longer for occupiers to commit once they have narrowed their search to a particular property. Conversion rates for end leasing are lower with companies holding out to make sure they have identified the best property within their budget and location. Landlords are having to work much harder to secure lettings with incentives for both offices and industrial increasing.”
