Although Covid during 2020 was officially registered as a recession there have only been two during my working life, the first lasting 1.25 years in 1990 and the second lasting the same period in 2008. Both had notable effects upon the property market. However, despite some sectors such as retail and leisure having to change to meet demand, we have seen positive growth and commercial property has proved to be a sound investment.
We are in uncertain times with high inflation, rising interest rates, historically high fuel prices and a cost of living crisis. To date the commercial market has weathered this particular storm fairly well.
Here in the South West prime retail within town and city centres has been the hardest hit during the pandemic which, accentuated the problems associated with online buying. We have seen a new lease of life in secondary retail locations as independent traders with more interesting offerings taking up opportunities at lower rents and, hopefully in time, lower business rates.
Transaction levels in the office sector remain fairly low as they have been for a number of years. Working from home and hot desking is likely to be here to stay as businesses re-think their floor space requirements. Having said this, the importance of being in the office, communicating with one another face-to-face and training new staff in a working environment has understandably come to the fore. Rents and capital values have remained fairly stable for a number of years. Prime rents in Somerset remain at between £15.50 and £16.50 psf with second hand non-air conditioned accommodation between £8 and £12 psf dependent upon location and specification.
It is the industrial sector that has fared best with continued demand, where there has been limited supply since 2018. Rents for new build, trade counter and industrial units have recently exceeded £10 per square foot and capital values of £175 psf have been achieved in Somerset.
Investment in commercial property is strong with better returns than the residential sector. There are occupiers that would rather own than rent and there is a notable shortage of commercial development land with owner/occupiers paying strong money for the smaller sites.