Retail property demand continues to fall

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The retail property market has continued to decline over the last quarter, with tenant demand hitting the lowest level since 2012.

According to the Royal Institute of Chartered Accountants’ Commercial Property Market Survey, retail tenant demand dropped eight per cent in the second quarter, with 53 per cent of respondents saw a fall in demand.

Available space in the retail sector subsequently rose sharply with 46 per cent of respondents reporting an increase, marking the highest increase in nearly a decade.

Rental expectations also fell dramatically in the retail sector, with a net balance of -52 per cent.

Expectations for both prime and secondary for the coming year are now negative as respondents downgraded their forecasts significantly compared to last month.

Furthermore, over a third of respondents said they had seen an increase in the usage of CVAs over the past year, and two thirds admitted they expected retailers to insert more CVA clauses into their contracts going forward.

“Given the ever-increasing effects of technological development on property, it is increasingly difficult to predict how this will play out on the curves, peaks and troughs of the respective sectors particularly retail,” BL Real Estate’s James Cartmell said.

“In the short term, values appear to be polarising by sector and/or location – in the longer term, who knows how or if we will use bricks and mortar for commercial reasons.”

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