RENTS are expected to fall in the commercial property market as occupier demand weakens, according to a new report by the Royal Institute of Chartered Surveyors Scotland.
RICS’ Commercial Property Market Survey for the fourth quarter of 2017 found retail property was lagging behind industrial and office sectors.
The findings come as Ediston Property Investment Company, which holds 9.2 per cent of its assets in Scotland, said there remained strong demand in the commercial property sector, but the possibility of interest rate rises compounded by continuing geopolitical uncertainty and the prospect of a slowing economy, could lead to a recovery in yields, which would lead to a fall in asset values.
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RICS said industrial units were the “star performer” in a “relatively solid” fourth quarter.
Rents and capital values in the industrial property sector are also expected to rise in the three months ahead, in contrast to the retail sector where they are expected to be flat or fall. But with development starts in the industrial property sector also reported to be falling, this may cause concern regarding industrial property supply into the future.
Gail Hunter, RICS director in Scotland, said: “The latest survey shows a continuing divergence across sectors, with the industrial sector remaining the clear outperformer and retail continuing to lag significantly.”
In its year-end report, Ediston, whose assets now total £350m, said retail warehousing is the one sector of the market which is “looking attractive” with low vacancy rates and in a position to benefit from yield compression following a general fall in values after the Brexit vote.