How Brexit is lowering the demand for retail property
Brexit has been causing turmoil in the UK’s property market. It comes down to thie uncertainty surrounding what will happen next. According to The Royal Institution of Chartered Surveyors (RICS), the demand for retail property in the South East took a huge downturn this August in the lead up to Brexit.
RICS reported these results after the Q2 UK Commercial Market Survey found the commercial property industry faced a sharp decline. Altogether, 64% of the South East’s commercial property agents saw decreased demand for retail spaces during Q2 of 2019. As such, the number of vacant retail spaces are on the rise according to 55% of agents.
The Brexit effect
Brexit is making it difficult for businesses to make key decisions in their business, such as opening new shops, expanding, or leaving the UK altogether. Depending on how we leave the EU – whether we leave with a deal or crash out with nothing – some businesses could become unprofitable, and many are avoiding settling further in the UK property market.
The problem is big among car manufacturers. Ford, Honda, Jaguar Land Rover, Nissan, Rolls-Royce, and Toyota have all started plans to either downsize in the UK or move operations to other European countries in the face of Brexit. When it comes to retailers, according to The Guardian, shops are suffering from weaker sales as Brexit uncertainty mounts.
The British Retail Consortium (BRC) and accountancy firm KPMG said total sales growth dropped to 0.05% in February. This is down from 1.6% the previous year. It appears shoppers are more reluctant to spend on goods. This is bad news for retailers who are typically sensitive to sudden changes in revenue.
The demand for commercial property
Brexit is impacting the decision-making process. Especially for SMEs who don’t always have the resources available to pack up shop and move when times get tough, unlike the large car companies. Despite this, industrial and office buildings seem to be stable, however, retail is lagging behind.
As a result, over the next 12 months, it’s estimated prime and secondary retail rents could fall by 3.3% and 4.5% respectively, whereas office rents could rise by 1.9%. This is good news for retailers who are staying put, despite the uncertainty Brexit brings. It’s also a good opportunity for small, independent retailers to acquire better spaces affordably as landlords shift their collaborations to independent tenants.
There is an opportunity for acquisition agents to get on top of the changing retail marketplace and seek the most desirable retail spaces for independent retailers looking to improve their location while rents are low. Lower rents could bring in a little more business over the next few months.
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