COMMERCIAL PROPERTY MARKET OVERVIEW
2020 was set to be the start of a strong financial period for the UK economy. Certainly in January and February this proved to be the case, with the commercial property sector seeing increasing volumes of sales and lettings. This strong start came to an abrupt halt at the end of February with the COVID-19 Pandemic.
As the lockdown was lifted, confidence has returned to the commercial sector, with the exception of offices and retail. This somewhat mixed picture is overshadowed by general uncertainty, and a lack of confidence in the future. The Pandemic has had a significant impact on the general economy, with Gross Domestic Product falling by 20% in April, by comparison month on month with 2019. This has inevitably affected the property market, with some commentators predicting that overall commercial property returns will fall by 7% this year.
The government has implemented measures to breathe life into the economy, but it is uncertain how successful these will be. We are most concerned about the performance of the retail and office sectors, both are set to underperform as structural pressures with the increasing threat from online sales (exacerbated during the lockdown) and the office market affected as companies recognize the economic advantages of home working, a trend that is attractive to companies that wish to move away from expensive central city locations to take advantage of cheaper suburban space. We can report low levels of interest in city centre offices, with increasing demand for suburban accommodation, located closer to residential areas.
The amendments being implemented to the property Use Class Order, allowing changes of use away from commercial to residential occupation, may have significant positive effects on some property values.
London’s Surveyors and Valuers consider that the commercial property market will show signs of recovery in the coming months, although it is likely to be well into 2021 before sales and lettings return to the levels seen pre COVID-19.