Retail, office, and industrial sectors see renewed investor interest
Demand for investment in the UK retail property sector has increased significantly, according to new figures from Rightmove.
The commercial property platform reported a 35% rise in retail investment enquiries in the latest quarter compared to the same period last year, based on agent enquiries through its website.
High street retail properties accounted for much of the growth, with demand up 56% year-on-year — the highest level recorded since 2021. This marks a reversal from last year, when retail investment demand had fallen by 15% and the sector experienced a slowdown since 2022.
The uptick in activity has been attributed in part to interest rate reductions, including the Bank of England’s second rate cut of the year in May. Overall, commercial property investment demand rose by 20% in the second quarter of 2024 compared to the previous quarter.
Supply constraints may also be influencing the market. The number of retail properties available for investment has dropped by 4% year-on-year and has been declining since the start of 2024. Meanwhile, demand from businesses to lease retail space has increased by 10% over the past year, suggesting continued interest in physical retail locations despite the expansion of online shopping.
The office sector has seen a similar recovery. Investment demand for office space is now 65% higher than a year ago, after a 13% decline during the same period last year. Business leasing demand for office space is up 12% year-on-year, with London seeing a 14% rise. Notable increases were recorded in Westminster (up 29%) and the City of London (up 21%).
The industrial sector led growth this quarter, with investment demand more than doubling (up 105%) compared to last year. Leasing demand for industrial space also rose by 41%.
“The growth of the industrial sector has been one of the main stories so far this year, but we can see a resurgence to invest in retail and office space too,” said Andy Miles, managing director of commercial real estate at Rightmove. “Rate cuts are helping investment into commercial property, and after a period of decline it appears that retail and office spaces are becoming more attractive to invest in.
For Michael Sears, commercial advisory panel board member at NAEA Propertymark, it is positive to see a rejuvenated appetite regarding investment within the retail and office space sectors, especially considering habits have shifted significantly in recent years.
“Online commerce fundamentally changed how people shop in many cases, and the pandemic accelerated the home working revolution,” Sears said. “However, these figures are the highest they have been since 2021 and show that there is still a healthy desire for high-quality retail space across the UK and that many employers are also finding a new balance for their office space requirements that complements hybrid working arrangements with their colleagues. These factors added together are a positive sign of a high street resurgence in many regions.”
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