At this point, everyone is familiar with the various economic challenges facing businesses, from higher energy prices to the cost of living crisis that is constraining people’s ability to spend in many areas. This is having a notable knock on effect on the real estate market.
With many companies acting more cautiously in the face of the unknown, one emerging trend is a greater focus on quality in real estate. Premium spaces with better facilities, access and refurbishments are becoming more sought after as businesses try to get the most out of their spend – and that is making the best properties more valuable.
The recent UK Real Estate Market Outlook from CBRE highlights this. We’ve taken a look and analysed some of the data to anticipate what might be coming for 2024.
Offices
It is likely that full-time office-based employment will continue falling as hybrid working becomes increasingly embedded in our regular day-to-day patterns, according to CBRE. This does not mean that businesses will stop using offices, but if people are only in three days a week then it is likely that many will need less overall space.
While this might sound like a negative, it is in fact good news for certain sections of the market. Specifically, it should be noted that newer offices and those undergoing refurbishment are more popular than ever, with the proportion of pre-lets for these spaces being extremely high.
On the other hand, offices that are poorly located, of low quality or which do not have high sustainability ratings are falling in popularity.
Viewed through this lens, it is not a case of offices as a whole being in trouble, it is more like bad offices are less appealing. In an era of caution, this means that new or refurbished spaces which have a great location, are amenity-rich and can help businesses meet their Net Zero goals are more popular than ever.
Finally, the missing ingredient is flexibility. If a business can get all of those benefits on a flexible contract that allows them to only pay for the space they need, that is the magic formula in the age of hybrid working.
View our portfolio of new and refurbished flexible office spaces by clicking here.
Industrial and logistics
The UK industrial and logistics market is enjoying a very good period at the moment and CBRE analysis shows that we can expect take-up levels to be above the 10-year average for some time, especially when it comes to logistics businesses.
Vacancy rates across the sector are critically low, with figures below 2% over the last five quarters. This is having two notable effects. Firstly, new stock is being very quickly absorbed and let by the market. Secondly, rental growth is likely to continue as a consequence with the Northern and Midlands markets leading the way in this regard.
The CBRE report states that at the current rate, there is only two months’ worth of ready-to-occupy space available, and that the supply response will continue to be insignificant in the face of this demand throughout the rest of the year.
With these conditions as the backdrop, investment into new new-build facilities and the refurbishment of existing property is at a high level and this is raising the bar for quality across the sector. In the future, when supply catches up and demand settles somewhat, these new and refurbished facilities are likely to retain their attraction as the quality will speak for itself – particularly when compared to older stock which will be dated and hard to justify for businesses.
In the market for a new industrial or logistics property for your business? Click here to see our available sites today.
Retail
The retail market always seems to be at the heart of the UK’s economic discussions as people worry about the fate of the high street and shopping centres, and their place in the wider landscape. However, is it really as bad as it seems for the world of retail real estate?
The UK Market Outlook shows that there is still great value in physical retail, with 71% of consumers preferring a physical store for their essential purchases. As budgets tighten with the cost of living crisis, it follows that a greater portion of many peoples’ spend will therefore be in physical retail. Due to that, CBRE predicts that the number of retail business ‘casualties’ will be lower this year than in 2022.
The recent changes to business rates are also help many retail companies, and it is anticipated that there will even be a modest occupier expansion from some of the more well positioned retailers because of this.
Another area of the retail sector that has a positive outlook is the world of market stalls which have potential to grow this year. The second hand market is a great example of how this is occurring and what one aspect of retail real estate’s future could look like in 2024 and beyond. If you are in the second hand sector, this is an ideal time to look at why a market stall like those at Bygone Times might be a good option for you.
That is just one example in a market where there are a whole range of exceptional retail spaces available. Despite some inaccurate reports, the high street is far from dead and 2024 may show the first signs of a serious recovery as retailers meet consumer demands and expand their premises.
Looking to rent a retail space for your business? Click here today to see our portfolio of available units and get in touch with the team.
In economic times like these, quality becomes the key factor when looking at new commercial space for your business. Whether you are catering for newer flexible work patterns, want to upgrade your industrial and logistics space, or are considering a retail expansion, the FIREM team will have something to suit your business.
Our portfolio features many of the finest commercial buildings in the UK and your next premises could be among them. If you’re looking for a new space, get in touch with the team today by clicking here.