Demand for shops, offices and industrial space in the North-East has seen its first real rise since 2011.
According to the Royal Institution of Chartered Surveyors around nine per cent more of its regional members reported rises rather than falls in demand for shops and industrial premises between August and October this year, the first substantial rise in two years.
“Since the end of the summer holidays, it is fair to say we have seen an increase in general enquiries, but mainly for secondary retail space and industrial workshops,” said Richard Finney, a director at North-East Commercial. “There appears to be improving confidence in the commercial property sector despite the office market still proving a challenge.”
But it was still very much a “buyers’ market”, stressed Finney. “Whilst all this increased activity is promising, sellers must be realistic with their aspirations, asking prices and rentals still need to be based on the market evidence.”
The pickup in North-East retail demand is broadly in line with improved high street spending, claimed the RICS’s chief economist, Simon Rubinsohn.
“That does not mean that the big challenges facing the sector have disappeared,” he added. “Rent expectations are still largely soft away from the South-East of the country and it is mainly London where the numbers are strongly positive.”
In the North-East landlords are offering a variety of incentives to keep existing tenants and find new ones, including extended rent-free periods, stepped rents, rent reductions, and sharing or carrying out improvement works for tenants.
Many fear, at least in the region’s declining communities, it is too late to save the traditional high street. A recent Price Waterhouse Cooper report, commissioned from the Local Data Company, claims that more and more town centres are transforming from pure shopping destinations to “centres of leisure and services”.
The suggestion is that the High Street will gradually become a place to eat and consume services. If that trend continues, there will have to be greater incentives for smaller independents to take up vacant units and create a different kind of shopping experience on the back of the surrounding leisure businesses and outlets.
The latest RICS figures also showed the North-East led the national demand for industrial units with respondents reporting a 37 per cent increase in demand, compared with 11 per cent between April and June. And twenty-eight per cent claimed a rising interest in office space, more than double the second-quarter figure of 11 per cent.
New development starts in the region remains stubbornly low. New retail and industrial developments built in the region fell during the third quarter of the year, while the number of new office development starts increased slightly by 3 per cent.
“Confidence is certainly returning to the commercial property market, with more demand for all kinds of premises increasing and encouragingly many occupiers are looking at slightly longer leases in comparison to a year ago,” said James Dixon, an associate at Newcastle’s Knight Frank .
There was, he added, still a significant shortage of new commercial property space in the region, particularly industrial space, with financial issues remaining the main hurdle to new starts.
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