Industrial space driving recovery for struggling commercial property sector

Demand for warehouse space is providing a much-needed silver lining for the commercial property sector, according to new research.

Related topics:  Landlords,  Property,  Investment,  Commercial,  Industrial
Property | Reporter
28th September 2023
Commercial 882
"Luckily for the commercial sector, however, warehouse and industrial space remains in rude health"
- Nicholas Christofi - Sirius Property Finance

Debt advisory specialists, Sirius Property Finance, has found that industrial and warehouse space is currently the most in-demand commercial property sector after analysing current demand levels by measuring the number of commercial assets currently available on the market that have already been sold subject to contract as a proportion of all available investment opportunities.

For example, if there are 100 assets on the market and 50 are SSTC, demand is calculated as 50%.

The data shows that the highest level of commercial buyer demand is currently attributed to industrial/warehouse space.

Of all such spaces currently listed in England, 31% have already been snapped up, a figure that is -1.2% lower than it was in Q2. This demand is no doubt being driven by companies looking to facilitate and improve their ability to deliver online purchases to customers’ doors as efficiently as possible.

Regionally, the area with the highest demand for industrial/warehouse space is the West Midlands where 43.2% of listed stock is already SSTC. But it’s the South West that has seen the biggest quarterly demand increase of 3.8%.

Demand for office space in England currently sits at 27.6% having fallen by -2.7% on the quarter. Demand is at its highest in the West Midlands region (37.9%), but has seen the largest quarterly increase in the North East (1.8%).

Demand for retail space in England currently sits at 23.5% having fallen by -0.9% on the quarter. The retail demand hotspot is currently the South East where 29.4% of stock is SSTC. The South East has also recorded the largest quarterly demand increase of 3.4%.

Leisure/hospitality space is the least in-demand commercial sector in England, with just 13.2% of listed units already SSTC. This marks a minor -0.6% drop on the quarter. Despite this low national demand, the regional picture provides a silver lining in the form of the West Midlands.

Here, demand for leisure/hospitality space stands at 20.6% having increased by an impressive 6.4% since Q2.

Managing Director of Sirius Property Finance, Nicholas Christofi, commented: “In a cost of living crisis, many households are avoiding any unnecessary spending and so the impetus for investors to purchase leisure and hospitality space simply isn’t there at the moment, especially given how we have no idea how long this current economic uncertainty is going to last.

"Luckily for the commercial sector, however, warehouse and industrial space remains in rude health. It’s the one corner of commercial property that thrives in partnership with the internet as more and more businesses look for ways to fulfil the logistical requirements of online retail.

"As for office space and retail units, it’s a quiet time but an awful lot of thought is going into how to reimagine the way such spaces are used, and how to bring vitality back to what was, not so long ago, a vital part of our nation’s ecosystem.

"For savvy investors and equally savvy developers, the opportunities presented by this evolution are immeasurable, and it’s truly exciting to see what our relationship with retail and office space becomes.”

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