New insights from Rightmove reveal an 11% year-on-year increase in demand for commercial property investment, marking the biggest quarterly surge since 2021. The data, drawn from Rightmove’s Quarterly Commercial Insights Tracker, highlights rising interest across various property types, with the industrial sector leading the charge.
Industrial sector sees strongest growth
According to Rightmove’s analysis, demand for industrial properties has soared by 34% compared to Q3 2023. Industry experts attribute this growth partly to the Bank Rate cut in August and a subsequent trend of decreasing mortgage rates, which have lowered financing costs and made commercial property investment more appealing.
A Rightmove spokesperson commented: “We’ve seen some sharp increases in demand across all sectors in the investment market when compared with the same period a year ago. A likely contributor is falling interest rates, which is of course decreasing the cost of capital and making investing in commercial property more attractive.”
Positive outlook for industrial and logistics sectors
Claire Williams, Head of UK & European Industrial Research at Knight Frank, noted the sector’s resilience, stating: “This year, we have seen a return to a steady and robust occupier market, with take up of industrial space on a par with levels recorded in pre-pandemic years.” Williams highlighted improvements in consumer confidence, spurred by inflation falling below the Bank of England’s 2% target and wage growth surpassing inflation.
“Businesses are feeling more confident in pushing forward with expansion or relocation plans, in turn, boosting demand for industrial and logistics facilities,” she added. Williams pointed out that the increasing complexity of supply chains and a focus on sustainability are reshaping the sector, with more firms turning to third-party logistics providers leveraging advanced technologies like AI and big data to streamline operations.
Other market trends and perspectives
John Mitchell, managing director at Christie Finance, provided additional insight into the shifting investment landscape: “Although the Bank of England Base Rate is starting to fall, there is an acceptance that rates are not going to return to the record lows experienced from 2009 to 2022. Times have changed and there is now greater uncertainty. Therefore, some investors are potentially diversifying away from residential investment and looking for higher yields, and commercial property generally offers this.”
The leasing market also reflects this trend, with demand for industrial properties up by 10% compared to the same period last year. Supply in the sector has increased by 14%, indicating a robust market. Central London office leasing is showing mixed results, with growing demand in areas such as Westminster and Kensington & Chelsea, while eastern boroughs like Hackney and Tower Hamlets have seen declines.
As commercial property continues to attract interest, bolstered by favourable financing conditions and steady demand, the sector is poised for further growth. The evolving landscape offers opportunities for developers, operators, and investors looking to capitalise on a stabilising economy and an industrial sector at the forefront of technological innovation.
