In its latest survey, the Royal Institution of Chartered Surveyors (RICS) states occupier demand has increased by 12% in the third quarter due to a surge in the industrial sector, with 27% more respondents reporting a rise in demand for UK industrial property.
While this increase is felt across most regions, both London and Scotland have experienced a sharp decline with 24% more chartered surveyors in Scotland seeing a fall during the third quarter. Demand for London office space also dropped for a second consecutive quarter, with 22% reporting a fall. In addition, near-term rent expectations did not move into positive territory in either of these markets.
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With most of the UK returning to normality following the EU referendum, RICS said anecdotal evidence suggests that political uncertainty is still having an effect on both the London and Scottish markets. However, a fall in the price of the pound has seen a rise in foreign investment enquiries in the capital.
Simon Rubinsohn, RICS Chief Economist, said: "The negative mood in the Q2 survey reflected the fact that it was conducted in the immediate aftermath of the referendum. The latest results suggest that the commercial market has subsequently settled down, which is broadly consistent with much of the other macro news flow that has emerged over the past few months. In particular, the rebound in our occupier demand indicator suggests that for at least the time being, the UK economy is proving relatively resilient.
"Interestingly, the feedback we have received was noticeably more cautious in Scotland and parts of London, but despite this, our results do suggest that the drop in the pound is encouraging foreign investors to show interest in the market particularly in the capital."
Over the next 12 months, 24% of respondents expect capital values to increase, with prime industrial and office markets expected to see the strongest gains. However, activity in London and Scotland is again expected to remain flat over the coming year.
(LM/CD)
