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Values expected to rise

COMMERCIAL property rents and capital values in the East Midlands are expected to rise in 2020, according to the Q4 2019 RICS UK Commercial Property Market Survey. However, while anecdotal evidence suggests greater clarity over Brexit will spur on activity this year, it is unlikely to change the fortunes of the retail market.


The latest results show the East Midlands’ retail sector continuing to struggle. The number of people looking to rent retail space continued to fall (a net balance of minus 42 per cent in Q4, continuing a downward trend that was first seen in Q4 2016).

Looking at availability of leasable space, the number of empty retail units rose at pace. A net balance of plus 61 per cent of respondents saw an increase in available retail space this quarter; only Scotland saw a greater number of respondents reporting an increase in retail units. The increase in available premises has prompted a further rise in incentive packages, as 50 per cent more respondents reported a rise in inducements on offer to prospective tenants.

As more retail units remain empty, rental expectations for the coming three months and year ahead remain negative. In the coming three months a balance of minus 56 per cent of respondents expect to see a fall in retail rents. Capital value expectations in the East Midlands saw little change in Q4, as a net balance of minus 59 per cent% expect a fall, for the second quarter running.

Investment in East Midlands retail also declined in Q4 as a net balance of minus 39 per cent of respondents reported a drop in the number of enquiries for the region’s retail space. Overseas investment enquiries also reduced this quarter.


The region’s industrial sector is, once again, the most in demand with 16 per cent more respondents reporting a rise in interest. The amount of leasable space failed to keep up with demand as minus four per cent of respondents reported a fall in the number of available premises. The imbalance between supply and demand saw plus 28 per cent more respondents suggesting that rents will rise in early 2020 for the industrial sector.

Capital value expectations for the region’s industrial sector are positive in Q4 with a net balance of plus 43 per cent respondents expecting a rise in the coming three months (up from plus 28 per cent in Q3) Looking at investment, investors from the UK and overseas show the most interest in the region’s industrial sector, with domestic enquiries rising from a net balance of plus 36 per cent in Q3 to plus 42 per cent in Q4.


The East Midlands office sector saw modest growth in interest from prospective tenants this quarter, whilst the number of available units rose slightly. Respondents to the survey expect office rents for the coming three months to rise, albeit only modestly. Capital value expectations in the region remain flat for the third successive quarter, whilst respondents have reported seeing little change in terms of investment enquiries, whether that be domestic or overseas.

In Q3 2019, a majority of 56 per cent of East Midlands’ respondents perceived the market to be in a downturn. In Q4, this reading eased to 43 per cent. There has also been an uptake in respondents classifying the market as being in a stage of upturn, the plus 28 per cent net balance rose from plus 18 per cent in Q3.

Tarrant Parsons, RICS Economist, said: “Expectations appear to have strengthened in the office and industrial sectors following the decisive outcome of the general election, with markets in prime locations in particular seeing projections for capital value and rental growth revised higher. That said, this improved sentiment has not found its way into the retail sector, where the outlook remains just as downbeat as before. Given the continued rise in retail vacancies and sharply falling demand, any change in fortunes across the sector still seems to be some way off. In the meantime, further downward adjustments in rents and capital values expected both in the year to come and further ahead.”

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