The outlook for London’s commercial property economy remains positive, despite a low number of transactions taking place in June, and reduced market lending.
As we head into Q3 there are promising signs of life being breathed into London’s commercial sector and predictions of a property rebound.
Challenges with Covid-19 still exist and people are understandably cautious but there is a lot of pent up demand from both buyers and sellers, who have emerged from lockdown looking for opportunities. Remember too that there are a large backlog of outstanding deals to work through which will make sales figures look higher than normal.
A number of properties have also not been openly marketed, with vendors preferring to sell off market. This trend is expected to continue, especially with the majority of near-term commercial properties. This is because vendors want to command strong prices and don’t want to give buyers the impression they’re selling due to financial distress.
In general, vendors are preferring to sit tight and wait-and-see what prices do and if they remain robust. This means we expect slim pickings until the commercial property economy builds back up. When this happens, solid assets that are well-situated, and that can provide secure, medium-to-long term income, are likely to be sought after and fetch good prices.
Despite the uncertainty surrounding the commercial property economy, there’s no evidence to suggest that prices for prime commercial property will drop significantly. In fact, investors look to be seeking higher quality, lower yielding alternatives, especially if they hold riskier near-term leasing or development assets.
Looking ahead, the ongoing resilience of the UK supermarket sector in the face of Covid-19 should continue to entice investors and support transaction activity. We expect supermarkets will continue to be one of the standout subsectors of the retail investment market, as we progress into the latter part of 2020 and into 2021.