Demand for commercial rentals highest in East of England

Low investment costs and high rental returns are driving demand for commercial property purchases and rentals in the east of England, according to the latest market analysis from Sirius Property Finance.

Related topics:  Landlords,  Investment,  Commercial
Property | Reporter
5th April 2023
Commercial to let 103
"While a robust level of investor demand remains, upward price growth across some regions has impacted their appetite for investment, even when rental values have also increased notably"

Research by the firm looked at both current demand for commercial sales and rentals, as well as the change in the cost of investing and the rents achieved over the last year and found that, currently, 34.1% of all commercial property listings on the market have already been purchased by commercial real estate investors (under offer or sold subject to contract).

Rental demand for these commercial units is somewhat lower, with just 16.3% of all commercial rental stock having already been let.

However, when looking at the regional picture it’s the East of England that is home to the strongest commercial real estate market at present. 44% of all commercial investment opportunities across the region have already been snapped up by investors, while 24% of all commercial lets have already found tenants.

Further research from Sirius Property Finance suggests that this strong demand is being driven by a fall in investment costs and rising rental returns.

Across Britain as a whole, the average price of commercial real estate has fallen by -12.7% over the last year, while rents are up 4.9% annually. Across the East of England, the average price of commercial real estate has fallen by -9.2% in the last year, while the average rent achieved is up by 19.3%.

The South West and South East also rank in the top three for both commercial sales and rental demand, while the North East is the least in-demand region.

In contrast to the East of England, the average commercial rent is up 42.8% across the North East, second only to the North West where it has climbed by 102.1%.

What’s more, the North East has also seen the largest increase in the average price of commercial real estate, climbing 15.9% in the last year, versus an average decline of 12.7% across Britain as a whole.

Kimberley Gates, Head of Corporate Partnerships at Sirius Property Finance, commented: “It’s certainly a bit of a mixed picture across the current commercial real estate sector and while a robust level of investor demand remains, upward price growth across some regions has impacted their appetite for investment, even when rental values have also increased notably.

"In contrast, there are some regions, such as the East of England, that offer the ideal balance of softening property prices along with strengthening rents and it’s no surprise that demand in these regions is substantially higher.

"With the commercial sector having largely recovered from the impact of the pandemic, we expect to see demand continue to return to the sector, although this activity will be largely focussed in areas that offer the best bang for buck in what is becoming an increasingly difficult economic and financial landscape.”

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