"In contrast, the aftermath of COVID and the ongoing cost of living crisis is continuing to impact appetites for leisure and hospitality space and it remains the least in-demand sub-sector within the commercial space"
Sirius Property Finance analysed current demand across the commercial property sector by measuring the number of commercial assets currently available on the market that has already been sold subject to contract as a proportion of all available investment opportunities. For example, if there are 100 assets on the market and 50 are SSTC, demand is calculated as 50%.
While all eyes turn to the ongoing turmoil in the residential housing market, recent economic struggles are also having a profound effect on the commercial property sector.
The highest level of commercial buyer demand is currently attributed to development sites. Of all development opportunities currently listed on the market, 37.4% are already SSTC, demonstrating strong demand from commercial investors looking for a blank canvas on which to build.
Regionally, commercial appetites for development sites are at their strongest in the East of England where demand sits at 43.9%.
The constant rise of online retail and e-commerce is contributing to strong demand for warehouse and industrial units, with demand currently measuring 32.3% across the nation, making it the second most in-demand avenue of commercial investment - with demand rising as high as 43.9% in the West Midlands.
And despite the common narrative that more and more people are shunning the office to work remotely from home, and stories of major brands and companies promoting a flexible working environment, demand for office space remains healthy.
National demand for office space currently sits at 30.3% across England, but rises as high as 44.9%, again in the West Midlands region.
In contrast, nationwide demand for retail space is currently 24.4% as brands and vendors struggle to make physical retail profitable.
But due to an increasing number of forward-thinking retailers finding success through a more experience-led high street shopping model, retail is not the least in-demand category of commercial property.
That dubious honour goes to the hospitality and leisure space, where investment demand is currently just 13.9%, dropping as low as 7.5% in the North East.
Head of Corporate Partnerships at Sirius Property Finance, Kimberley Gates, commented: “We’re seeing the dominance of online retail having a significant impact on commercial property, boosting warehouse demand and suffocating physical retail demand.
"In contrast, the aftermath of COVID and the ongoing cost of living crisis is continuing to impact appetites for leisure and hospitality space and it remains the least in-demand sub-sector within the commercial space.
"But there is an undeniable ebb and flow to commercial property demand which means those sectors that are currently struggling could find their fortunes turning in the near future. For example, as and when the cost of living issue is brought under control, restaurants and bars will become more affordable and attract more customers which will, in turn, lead to an increased demand for hospitality and leisure units that have fallen out of favour since the early days of the pandemic.
"Furthermore, high demand for development sites shows that developers are confident about the future and that current woes will improve before too long.”
