Occupier and investor demand for commercial property in Wales edged upwards in the first quarter of the year according to the latest Royal Institution of Chartered Surveyors (RICS) Commercial Property Monitor.
A net balance of 5% of Welsh surveyors reported a rise in overall investor demand through Q1 2025, which is the highest this balance has been since March 2022. Looking at the subsectors, the industrial sector outperformed office and retail as a net balance of 21% of surveyors reported a rise. Investor demand for office space was said to have fallen flat, and a net balance of -8% of Welsh respondents reported a fall in investor demand for retail space.
Looking at occupier demand, a net balance of 7% of respondents in Wales reported a rise overall, after falling flat the previous two quarters. Looking at the subsectors, a net balance of 14% of surveyors reported a rise in occupier demand for in industrial space, and a net balance of 14% also noted a rise for office space which is the highest this balance has been in three years. A net balance of -8% reported a fall in occupier demand for retail space.
Regarding capital value expectations, on the three-month outlook, surveyors in Wales expect a fall (a net balance of -6%). A net balance of 14% of respondents anticipate that capital values for industrial space will rise through the next quarter, and a net balance of 7% expect rents for office space to rise which is the first time this balance has been in positive territory since late 2019. Capital values for retail space are expected to fall in the short term at the fastest rate in over a year (a net balance of -38%).
Surveyors in Wales are more optimistic on the 12-month capital values as a net balance of 13% of respondents expecting capital values to rise.
With regard to rental expectations, surveyors expect rents to be flat overall in the next three months. However, the picture is varied at a subsector level. A net balance of 14% of Welsh respondents anticipate that rents will rise for both office and industrial space, whilst a net balance of -31% expect rents in retail space to fall (down from -7% in Q4 2024). On the 12-month horizon, surveyors in Wales expect overall rents to rise (a net balance of 18%).
Chris Sutton of Sutton Consulting Limited in Cardiff commented: “The letting of the speculatively developed RYB1 50,000 sq ft unit in Ebbw Vale to Halton Flamgard means that no Grade A industrial floorspace remains on the market in South Wales. By contrast, there is increased availability of secondary industrial floorspace. In the office market, developer JR Smart is on-site to complete the 110,000 sq ft No. 1 John Street in central Cardiff, pre-let to Lloyds Bank. The challenge is to expand the office development pipeline for the medium term.”
Emily Hayes of MCC Estates in Monmouth added: “Office space enquiries have increased for shorter term, flexible office accommodation where tenants are looking to pay a monthly all-inclusive rent so that they can manage their finances and have flexibility over ending the agreement if they meet any business difficulties.”
Commenting on the UK picture, RICS Chief Economist, Simon Rubinsohn, said: “Despite the turbulence engulfing the geo-political environment following President Trump’s tariff announcement at the start of April, feedback to the latest RICS was steady with the headline investment enquiries metric returning to positive territory, albeit modestly, for the first time since the second quarter of 2022.
“Longer term indicators, while generally constructive, continue to reflect the likely headwinds facing the real estate market over the next twelve months. Aside from the challenges linked to the global economy, concerns around domestic issues including the impact of the uplift in NI contributions are seen as likely weighing on occupier demand.
“Meanwhile the bifurcation in the office sector remains very visible in the latest results with the outlook for prime space seemingly improving as sentiment around secondary offices remains deeply negative.”
