by Brianna Crandall — September 4, 2019 — RICS, the global professional body for qualifications and standards in land, property, infrastructure and construction, has released its Commercial Property Monitor for the second quarter (Q2) of 2019, with the industrial sector continuing to show market strength while office and retail markets continue to show a rise in vacancy rates.
Meanwhile, overall occupier sentiment held from Q1, even showing marginal positives gains.
Overall, tenant demand is increasing at a solid pace in the industrial and office sectors, while demand for retail continues to fall for the second consecutive quarter. Vacancies were cited as unchanged in the industrial segment during Q2 but continued to pick up in both the office and retail sectors.
This has prompted office and retail landlords to increase incentive offerings to tenants, an ongoing trend for the past three years.
Neil Shah, managing director, Americas, RICS, pointed out:
What we’re seeing is an owner-occupier market that is highly varied by sector. However, we are increasingly seeing that real estate professionals believe that we are peaking in the property cycle. This could be troubling for the retail sector.
According to RICS research, 49% of survey participants now view the market as having entered the peak phase of the property cycle. This is up from 41% in Q1 and is the highest share taking this view since RICS began tracking this indicator in 2015.
In line with this, investment enquiries rose, with a positive net balance of 22% of participants noting an increase. The industrial sector led with a net balance of 62% positive, followed by offices with a 31% positive net balance. However, enquires fell across the retail sector, with a net balance of negative 26% of participants noting a decline in Q2.
The report explains that capital value and rental projections for the coming year are signaling further robust growth across the prime industrial sector, along with more modest increases for secondary. Expectations are also said to be comfortably positive for prime offices, although the outlook is broadly flat for secondary. The retail sector continues to display the weakest sentiment, with values and rents projected to fall across secondary locations and remain stagnant for prime retail outlets.
For more information and graphs, download the Q2 2019: US Commercial Property Monitor (.pdf file) from the RICS website.
For those involved in the property and planning sectors, RICS also just published pioneering draft guidance, Measurement of Land for Development and Planning Purposes (1st edition), which provides global best practice for the consistent measurement of land.