20th July 2023
Subdued commercial property activity in first half of 2023
Alder King’s latest Market Monitor report shows commercial property activity in the first half of 2023 was subdued as pressures in the wider economy filtered through to the sector.
Concerns over inflation and rising interest rates impacted business decision-making whilst increased construction costs and yield shift made new development less viable. As a result, H1 office and industrial take-up in the locations featured in the report are significantly down on the same period last year.
All eyes are now focused on the second half of the year. The indicators are much more positive – inflation is falling, business investment is forecast to rise and the volume of active requirements, together with the number of transactions already in solicitors’ hands, are likely to translate into a much stronger second half.
In the investment market, the severity of the price correction in H2 2022 led to a significant mismatch between vendor/buyer expectations, resulting in lower transactional volumes in H1, but we expect to see improved activity levels in H2.
As in recent years, strongest occupier demand is for well-specified space that meets companies’ ESG criteria. The shortage of quality supply remains an issue in most business locations and this has supported further rental growth this year in Bristol, Exeter and Gloucester.
The reduced level of new development because of the economic factors outlined above is likely to result in an increased shortage of top end supply in many locations from early 2024 onwards which, when coupled with the existing lack of good quality second hand available space, could continue to impact take-up.