2022
9
UK Commercial Property Market Report 2022
2022-07-07T04:09:58+01:00
OX1103141
1495
152765
[{"name":"Construction","url":"https:\/\/store.mintel.com\/industries\/business-industrial\/construction"}]
Report
en_GB
“In a more uncertain economic and geopolitical environment, investors are turning risk-averse and shifting their focus to the longevity and durability of their income returns. Property assets with long lease…

UK Commercial Property Market Report 2022

£ 1,495 (Excl.Tax)

Description

The UK Commercial Property Market Report 2022 identifies consumers’ attitudes towards sustainability when it comes to building design, the impact of global crises and supply chain issues on the commercial real estate industry, and the impact of post-pandemic practices on the Commercial Property Market in the UK. This report covers the UK commercial property market size, market forecast, market segmentation and industry trends for the UK Commercial Real Estate market.

Current Market Landscape

The UK commercial property market shows good recovery, supported by capital value growth across key sectors, including improvement in occupier demand in office and retail sectors. However, our UK commercial property report shows that economic headwinds and surging costs may dampen occupier performance. The industrial and alternative sectors continue to attract the strongest investor interest, while positive sentiment in prime office and certain retail assets also continues.

Moreover, the adoption of WFH practices during the pandemic is having a lasting impact on the commercial property market in the UK, with many companies adopting hybrid working models. This has raised uncertainties around future levels of office occupation and is expected to lead to an overall decline in office space requirements and greater demand for more flexible office leases.

Commercial Property Research UK: Market Share and Key Industry Trends

According to our commercial property research UK, demand for prime regional offices is increasing and driven by the government’s commitment to “levelling up” the UK economy. Investors are therefore expected to continue to target long-income opportunities, with assets classes such as warehouses, data centres, healthcare, retirement living, and mixed-use assets to remain popular.

In the short term, our UK commercial property market forecast predicts that occupier performance in the office and retail sectors may be tempered by the more uncertain economic outlook and surging costs. While the industrial sector is not insulated from the economic and geopolitical headwinds, demand for high quality, well-placed warehouses is expected to remain strong due to online sales that demand for fulfilment space. Global supply chain issues are also set to support demand as companies invest in warehouse space to combat supply chain disruption and to be closer to their customers in the UK.

  • 31% of growth has been observed within the industrial sector.
  • 36% of the overall growth are accounted for by commercial property stock.
  • 55% of the total commercial property market are accounted for by investors.
  • 31% of investors are based overseas.

UK Commercial Property Market Forecast & Future Trends

Our UK commercial property report predicts that mixed-use spaces are set to be a key trend over the coming years. Sustainability credentials of buildings are also becoming increasingly important to investors and occupiers across all asset classes, as ESG factors move up corporate agendas.

Commercial property companies are recognising the growing focus on ESG, with these factors now playing a crucial role in building design. For landlords, considerations are likely to revolve around improving the thermal performance of buildings, incorporating renewable energy generation where suitable, installing EV charging stations and investing in smart building infrastructure

Read on to discover more details or take a look at all of our UK Financial Services Market Research.

Quickly Understand

  • How key sectors of the commercial property market have performed in the unprecedented disruption of the COVID-19 pandemic and how they are emerging from the crisis.
  • Opportunities and threats across the key sectors of the UK commercial property market.
  • How the market is expected to develop over the next five years.
  • Trends in investment activity across the key sub-sectors of the commercial property market in the UK.

Covered in this Report

Products: Retail (shops, shopping centres, supermarkets, retail warehouses, department stores, factory outlets, car showrooms, garden centres, food and beverage offices, all types of office buildings, industrial (distribution warehouses, standard industrial units, workshops and storage facilities, self-storage, other commercial property (hotels, cinemas, theatres, holiday sites, car parks.

Brands: Real Estate Investment Trust (REIT), British Land, Bruntwood, Grosvenor Group, Hammerson, Landsec, SEGRO, and more.

Expert Analysis from a Specialist in the Field

This report, written by Claudia Preedy, a leading analyst in the B2B sector, delivers in-depth commentary and analysis to highlight current trends in the UK commercial real estate market, and adds expert context to the numbers.

In a more uncertain economic and geopolitical environment, investors are turning risk-averse and shifting their focus to the longevity and durability of their income returns.

Property assets with long lease structures and strong rental covenants are therefore attracting attention as investors seize on opportunities to create long-term, secure, income-producing assets. This means asset classes such as warehouses, data centres, healthcare, retirement living and mixed-use assets will remain popular.

Claudia Preedy
Claudia Preedy
B2B Analyst

Table of Contents

  1. Overview

    • Key issues covered in this Report
    • COVID-19: market context
    • Economic and other assumptions
    • Covered in this Report
  2. Executive Summary

    • The five-year outlook for UK commercial property
      • Figure 1: Commercial property outlook, 2022-26
    • The market
    • UK commercial property market shows good recovery in 2021
      • Figure 2: Value of UK commercial property market, 2012-21
    • Re-emergence of investor activity
      • Figure 3: Investor-owned share of UK commercial property market, 2017-21
    • Office sector returns to growth in 2021
    • Retail sector’s share of commercial property market falls from 37% in 2017 to 28% in 2021
    • Industrial/logistics sector continues to be the strongest performing sector
    • Capital value of ‘other’ commercial property sector up by an estimated 4% in 2021
    • Commercial property capital value set for sustained growth, but with divergence across key sectors
      • Figure 4: Forecast UK commercial property market, 2021-26
    • Companies and brands
    • Overseas investors are the largest single investor type
      • Figure 5: Holdings in commercial property market, by investor type, 2020 (% of total investor-owned commercial property stock)
    • ESG factors moving up the corporate agenda
  3. Issues and Insights

    • ESG factors moving up the corporate agenda
    • Trend towards retail space repurposing
    • Flex space operators benefit from the hybrid work trend
  4. Market Size

    • Overview
      • Figure 6: Value of UK commercial property market, 2017-21 (£ billion)
      • Figure 7: Value of UK commercial property market, 2012-21
    • Re-emergence of investor activity
      • Figure 8: Investor share of UK commercial property market, 2017-21 (£ billion and %)
    • Non-residential floor space and rental values
      • Figure 9: Non-domestic property floorspace and rental value in England and Wales, 2014-24
  5. Market Segmentation

    • Segmentation by sector
      • Figure 10: Segmentation of the UK commercial property market, by sector, 2017-21 (£ billion)
      • Figure 11: Sector share of commercial property stock, 2021 (% of capital value)
    • Segmentation by investor type
      • Figure 12: Holdings in commercial property market, by investor type, 2020 (£ billion)
      • Figure 13: Overseas investors’ Holdings in commercial property market, by investor type, 2020 (£ billion)
  6. Office Sector

    • Overview
    • Overseas investors continue to be the most active investors in office market
    • Flex space operators benefit from the hybrid work trend
    • More traditional property owners and landlords enter flexible workspace market
    • Regional office markets bounce back in 2021
    • London office take-up gains momentum in second half of 2021
    • London office investment market shows resilience despite economic headwinds
    • London office construction activity remains above the long-term average
    • Regional office supply pipeline
    • Capital value of UK office market returns to growth in 2021
      • Figure 14: Capital value of the UK office market, 2017-21 (£ billion)
      • Figure 15: Office property transactions in Great Britain, 2017-22
      • Figure 16: Central London office property transactions, by investor type, 2022
      • Figure 17: Rest of UK office property transactions, by investor type, 2022
      • Figure 18: office floorspace and rental value in England and Wales, 2013-21
  7. Retail Sector

    • Structural change in the retail sector
    • Trend towards retail space repurposing
    • Retail parks show resilience
    • Investors focus on trophy retail assets in Central London
    • Investor appetite for shopping centres starting to return
    • Supermarkets provide secure investment alternative
    • Retail sector’s share of commercial property market falls from 37% in 2017 to 28% in 2021
      • Figure 19: Capital value of the UK retail property market, 2017-21 (£ billion)
      • Figure 20: Retail property transactions in Great Britain, 2017-22
      • Figure 21: Shopping centre property transactions, by investor type, 2022
      • Figure 22: Retail warehouse property transactions, by investor type, 2022
      • Figure 23: Shop/supermarket property transactions, by investor type, 2021
      • Figure 24: retail floorspace and rental value in England and Wales, 2013-21
  8. Industrial Sector

    • Overview
    • Retailers’ expansion plans and strategic reorientation of supply chains drive record take-up activity in 2021
    • Industrial and logistics investment volumes at all-time high
    • Continued shortage of supply, despite unprecedented levels of development
    • Capital value of industrial sector grows by nearly a third in 2021 alone
      • Figure 25: Capital value of the UK industrial property market, 2017-21 (£ billion)
      • Figure 26: UK industrial property market, by region, 2021 (% of total)
      • Figure 27: Industrial property transactions in Great Britain, 2017-22
      • Figure 28: Industrial property transactions, by investor type, 2022
      • Figure 29: industrial floorspace and rental value in England and Wales, 2013-21
  9. Other Commercial Sector

    • Overview
    • UK hotel investment market makes a robust recovery
    • Investors attracted to diverse leisure sector by secure, long-term income opportunities
    • Capital value of ‘other’ commercial property sector up by an estimated 4% in 2021
      • Figure 30: Capital value of the UK other commercial property market, 2017-21 (£ billion)
      • Figure 31: Property transactions in the leisure sector in Great Britain, 2017-22
  10. Regional Analysis

    • Regional analysis of non-domestic properties in England and Wales
      • Figure 32: Number of non-domestic rateable properties in England & Wales, by sector and region, 2021 (000s and % of total)
      • Figure 33: Rateable value of non-domestic properties in England & Wales, by sector and region, 2021 (£ million and % of total)
    • Regional analysis of commercial property transactions
      • Figure 34: Commercial property transactions in Great Britain, by region, 2018-22 (£ million)
      • Figure 35: Regional importance in commercial property transactions, 2019-21
  11. Market Forecast

    • The five-year outlook for UK commercial property
      • Figure 36: Commercial property outlook, 2022-26
    • Commercial property capital value set for sustained growth, but with wide divergence across key sectors
      • Figure 37: Forecast UK commercial property market, 2021-26
    • Industrial/logistics sector set to continue to outperform market
      • Figure 38: Forecast segmentation of the UK commercial property market, 2022-26 (£ billion)
      • Figure 39: Forecast segmentation of the UK commercial property market, 2022-26
    • Investors to continue to target long-income opportunities
    • Market drivers and assumptions
      • Figure 40: Key drivers affecting Mintel’s market forecast, 2015-26
    • Learnings from the last recession
      • Figure 41: Industry performance following the last recession, 2008-16, (£ million)
    • Forecast methodology
  12. Market Trends

    • Environmental, social and corporate governance (ESG) factors moving up the corporate agenda
    • Development of commercial property yields
      • Figure 42: Prime market yields, by sector, 2019-22 (%)
    • Rental price developments
      • Figure 43: Prime office rents in the UK, 2011-21
      • Figure 44: Prime retail rents in the UK, 2011-22
      • Figure 45: Prime industrial rents in the UK, 2011-22
    • Trends in commercial property lending
  13. Market Drivers

    • Economic factors
    • Surging inflation threatens economic recovery
      • Figure 46: Annual GDP growth rate, 2007- 21, (Annual % change)
      • Figure 47: Monthly output index of UK sectors, 2021-22
    • GDP outlook
      • Figure 48: Expectations of GDP annual percentage change, 2022-26
    • Bank rate starting to rise from historic low
      • Figure 49: Bank rate, 2008-22, by date of adjustment
    • Purchasing Managers’ Index Surveys point towards sinking business confidence, as rising prices hit demand
    • Business investment
      • Figure 50: UK quarterly business investment, 2006-22
    • COVID-19 escalates trend towards shorter leases
    • COVID-19 accelerates shift to online retail…
      • Figure 51: Growth of value of retail sales at current prices seasonally adjusted, 2017-21 (% change on previous year)
    • …But proportion of online retail sales is starting to fall
      • Figure 52: Average weekly value for all retailing and for internet sales, 2019-22
    • Other factors
    • Planning law changes
    • Government relaxes planning rules for converting unused commercial buildings into homes
    • Business rates contributing to the loss of high street retailers
    • Fundamental review of business rates in England
    • Industrial sector continues to offer strongest returns
      • Figure 53: Annual property returns, by sector, 2017-21 (% change)
    • Non-residential property transactions
      • Figure 54: UK non-residential property transaction completions, by country, 2017-21 (number)
      • Figure 55: UK non-residential property transaction completions, 2017-22
    • Commercial construction – a market susceptible to recessions
      • Figure 56: Long term development of commercial construction, 1970-2021
      • Figure 57: The new commercial construction market, 2016-21
      • Figure 58: Segmentation of commercial construction market, 2016-21 (£ million)
      • Figure 59: Forecast for commercial construction market, 2022-26
    • Industrial construction – COVID-19 disrupts a buoyant market
      • Figure 60: Long term development of industrial construction, 1970-2021
      • Figure 61: The new industrial construction market, 2016-21
      • Figure 62: Segmentation of industrial construction, 2016-21
      • Figure 63: Forecast for industrial construction market, 2022-26
  14. Industry Structure

    • Overview
      • Figure 64: Holdings in commercial property market, by investor type, 2020 (% of total investor-owned commercial property stock)
    • Overseas investors
      • Figure 65: Overseas holdings in commercial property market, by investor type, 2020 (% of total)
    • REITs
      • Figure 66: UK listed REIT property portfolios, 2020 (£ billion)
    • Collective investment schemes
    • Institutional investors
  15. Company Profiles

    • British Land
      • Figure 67: British Land portfolio weighting, as at 31 March 2022 (£m and % of total)
    • Company strategy
    • Financial performance
      • Figure 68: Financial analysis of British Land, 2018-22 (£ million)
    • Bruntwood
    • Company strategy
    • Financial performance
      • Figure 69: Financial analysis of Bruntwood, 2017-21 (£ million)
    • Grosvenor Group
    • Company strategy
    • Financial performance
      • Figure 70: Financial analysis of Grosvenor Group, 2017-21 (£ million)
    • Hammerson
    • Disposal of retail parks portfolio
    • Company strategy
    • Financial performance
      • Figure 71: Financial analysis of Hammerson, 2017-21 (£ million)
    • Landsec
      • Figure 72: Landsec portfolio weighting, by market value, as at 31 March 2022 (% of total)
    • Company strategy and outlook
    • Financial performance
      • Figure 73: Financial analysis of Land Securities, 2018-22 (£ million)
    • SEGRO
    • Company strategy
    • Financial performance
      • Figure 74: Financial analysis of SEGRO, 2017-21 (£ million
  16. Appendix – Data Sources, Abbreviations and Supporting Information

    • Abbreviations
    • Methodology
  17. Further Sources and Contacts

    • Trade associations
    • British Property Federation
    • The Association of Real Estate Funds
    • British Council for Offices
    • The Commercial Real Estate Finance Council Europe
    • The Investment Association
    • The Investment Property Forum
    • Trade magazines
    • Estates Gazette
    • Property Magazine International
    • Property Week
    • Property Wire
    • Trade events
    • UKREiiF Annual Event
    • MIPIM

About the report

This market report provides in-depth analysis and insight supported by a range of data. At the same time, introductory and top-level content is provided to give you an overview of the issues covered.

Market

Mintel provides a range of market information, frequently through the category level, including market size and forecasting, complete with market drivers that illustrate the forces that shape a category or market.

Consumer

Mintel’s proprietary consumer research provides our analysts with the attitudinal and behavioral data used to provide valuable insight to topical issues.

Brand/Company

Mintel provides overviews of the top brands and manufacturers, and uses consumer research to explore attitudes and reactions to brands, as well as insight into what will resonate with consumers.

Data

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*databooks not available with UK B2B Industry reports.

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