The market for commercial real estate from occupiers and investors has continued to be relatively flat overall in the third quarter.
The latest Commercial Property Monitor from international real estate body RICS reveals generally solid conditions for the office and industrial sectors but retail continues to have a tough time as the shift to online shopping remains. Interest from occupiers and investors in retail declined in Q3 2019.
For the coming year though, retail should see a modest uptick, while office and industrial sectors look likely to see strong gains, especially in prime markets.
“While there is an industry-wide effort to invest in and transform real estate for a more connected and sustainable future, these innovations in how people live, work and play aren’t yet the standard, especially outside prime markets,” said Neil Shah, Managing Director for RICS in the Americas. “What this means for the overall retail sector is continued underperformance, particularly in secondary markets, in comparison to the office and industrial spaces.”
Capital value projections over 12 months are positive for all sectors apart from retail, although for industrial the projections have cooled despite ongoing sentiment.
“Real estate leaders are increasingly believing that, after a protracted period of growth, the market is now approaching the top of the cycle,” said Tarrant Parsons, Economist with RICS. “While indicators are still generally solid for other sectors, the troubles in the retail sector show no signs of abating. The downward demand trends, particularly in secondary locations, is likely to result in a significant decline in capital values over the year to come.”
Survey respondents were asked to compare conditions over the latest three months with the previous three months, as well as their views on the overall market outlook.