Pandemic prompts tumult in UK commercial property - RICS

Credit: REUTERS/Hannah McKay

Demand for British retail and office space contracted sharply during the third quarter and the outlook for the year ahead has worsened as working and shopping patterns change during the COVID-19 pandemic, a survey showed on Thursday.

LONDON, Oct 29 (Reuters) - Demand for British retail and office space contracted sharply during the third quarter and the outlook for the year ahead has worsened as working and shopping patterns change during the COVID-19 pandemic, a survey showed on Thursday.

The Royal Institution of Chartered Surveyors said 78% of chartered surveyors viewed the commercial property market as being in a downturn, up a little from 76% in the second quarter.

While there were clear signs of a pick-up in the industrial sites such as warehouses for online stores, there was little cheer from the office and retail sectors which saw another sharp fall in demand - albeit less severe than in the second quarter.

Separate figures from insolvency practitioners Begbies Traynor Group showed more than half a million businesses were in 'significant distress', up 6% over the past three months - though only a small fraction faced legal action, due partly to reduced court capacity.

"With so many businesses limping along there could be a flood of insolvencies when the courts do get back to anywhere near normal capacity and attempt to clear the backlog of pending cases," said Julie Palmer, a partner at the firm.

Firms in the real estate, hospitality, retail and construction sectors were struggling, Begbies Traynor said.

RICS said expectations of a fall in rents for prime office and retail space were the most widespread since records started in 2014, and demand for hotels and student housing was also weak.

"The physical retail sector, which was already struggling prior to the latest crisis, is being hit hard by the accelerated switch into online shopping and a drop in footfall associated with social distancing," RICS economist Tarrant Parsons said.

"Likewise, occupier demand across the office sector remains in decline and may continue to come under pressure going forward as businesses reassess their office space requirements following the increased prevalence of remote working."

A quarter of people worked from home in the week to Oct. 18, according to the latest official data.

(Reporting by Andy Bruce, editing by David Milliken)

((andy.bruce@thomsonreuters.com; +442075423484; Reuters Messaging: andy.bruce.thomsonreuters.com@reuters.net))

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