In August, NAEA Commercial agents reported the best outlook for the coming quarter was in the land and yards sector. Capital value, rental levels and investor yields are all expected to rise by the majority of respondents.
Several factors have contributed to industrial buildings and land/yards bucking the trend on commercial property
Firstly—lack of supply. The growth of online retailing has also meant growth in the demand for storage and distribution units of all sizes to meet the needs of the larger online brands and the smaller distributors retailing through portals such as eBay and Amazon.
This demand has had in turn a knock-on effect so that companies traditionally needing yard space have opted for pure yard spaces as opposed to industrial buildings with yards.
It is extremely promising that industrial units are in big demand, reflecting on ongoing growth and influence that e-commerce has in changing retail times. Land has also featured as a key factor, as this gives great scope to buyer flexibility for development, subject to planning permissions of course.
The overall hospitality sector is predicted to have a level of turbulence in regards to demand and pricing, influenced by the current cost of living discussions, uncertain support for business owners and the subsequent potential effect on customer trade.
The new prime minister will have a key task on their hands and I implore them to tackle Bank of England base rates and the leisure sector which ultimately shape the commercial property and business sales market as an urgent priority.
The worst outlook for Q3 2022 is for pubs and restaurants
With a large mismatch in supply and demand, capital values are expected to fall. Hotels are in a similar circumstance with rental levels expected to decrease resulting in negative expectations for rental yield change over this quarter. This outlook is a reflection of the influence of the cost-of-living crisis. With the public expected to cut back on unnecessary expenditures combined with rising fuel costs, the hospitality industry is likely to particularly struggle.
At the same time, take-aways may be slightly sheltered from the storm as individuals switch from eating out to eating at home. Capital values in the take-away sector are expected to hold, while agents anticipate a rise in investor yields.
