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Have investors lost confidence in the UK commercial property market?

Figures released from a new Savills survey indicate that confidence in the UK commercial property market has hit a three year low. What's responsible for the dip, and what are the potential consequences for commercial landlords?

Loss of confidence 

The data from Savills suggests that confidence in the UK commercial property market is at its lowest point since April 2013, despite an increase in commercial activity in January 2016 following a 35-month low. Kevin Mofid, a Director in Savills Commercial Research department, suggested that "investors and developers are delaying capital expenditure decisions until after the European referendum and London mayoral elections." Additionally, fewer new planning consents and the chance of a rate increase may have contributed to investor uncertainty.

Shortage of space

Compounding this problem is the fact that UK construction growth is at its lowest rate for nine months. As the economic recovery continues to gather pace, demand for commercial property has increased – 43% of chartered surveyors have noticed more businesses looking for industrial space in the final quarter of 2015.

At the same time, a survey released by the Royal Institute of Chartered Surveyors (RICS) shows that the number of commercial properties available has fallen for the 11th consecutive quarter. Commercial property advisors Bilfinger GVA stated in their January 2016 market review that: "Low levels of development activity mean that shortages of quality space have become increasingly apparent."

Extra demand combined with lack of supply is likely to lead to rent increases in the future. 35% of the chartered surveyors asked in the RCIS survey predicted a rise across all sectors for the next quarter, and 87% believed this would be the case within the next year. While this could potentially boost income for commercial landlords, rental growth can also make it more difficult for tenants to meet their obligations – meaning rent debts may increase. Enlisting the help of enforcement agents can help ensure that commercial rent arrears are collected in an ethical, efficient and timely manner.

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