Tenants are grappling with cost-of-living worries, surging energy prices, and interest rate hikes, leading to decreased profitability. Furthermore, the sector is experiencing a surge in liquidations, resulting in an oversupply of rental properties, causing rental levels to decline alongside reduced capital values and investment yields.
According to the NAEA Propertymark Commercial agents' November report, all sectors are experiencing a worsening outlook compared to the previous quarter. This downturn can be attributed to recent political and economic upheavals, which have dampened expectations of growth in capital value, rental value, and investment yield.
One of the major challenges highlighted in the Q3 survey was the scarcity of commercial stock. In the subsequent Q4 survey, agents pointed out that the industrial sector was particularly hard-hit by this lack of available properties.
Economic uncertainty is a prevailing concern for commercial agents, with rising interest rates being the most common worry. Investors with high levels of debt face adverse consequences due to increased borrowing costs. Moreover, a growing number of buyers are now fiercely negotiating on prices or attempting to re-negotiate previously agreed deals. As per the survey, 84% of agents reported that deals agreed upon are less likely to reach completion.