The commercial property market has performed healthily in Q2, as key sectors have continued to attract significant investment, but as the second half of the year approaches, there is suggestion that Q3 could see a notable surprise.

Investment shows direction of industrial property trend

The industrial property sector continues to be the market powerhouse and the driving force behind forward momentum. Investments in logistics facilities has been a notable feature of market activity in recent months, with money spent across the country, including in London and Manchester.

The announcement in May of a plan to build a portfolio of last-mile industrial and logistics warehousing throughout the UK is also significant – signposting the continued demand and profitability of this type of commercial property.

Notably, the decision to invest in last-mile properties and the focus of recent logistics property deals on urban locations suggests that investors should continue to keep an eye on smaller warehousing sites in major cities. While last-mile facilities serve a broad range of online companies, the growth of the ultra-fast growing delivery service sector and its need for in-city warehousing shouldn’t be ignored.

Is a beleaguered sector set to see an unexpected revival?

For all the talk of the rise of the ‘dark store’ property sector, this is not the surprise that some are forecasting for Q3. Following a buoyant start to the year, some are predicting a quicker-than-expected return for the office space market.

What is fuelling this somewhat unexpected bounce back? The return of the commuter is playing its part as offices reopen and stay open following the lifting of restrictions earlier in the year. At present, the most traction in this space is being seen in London and the southeast, with other areas expected to follow.

Decarbonisation and de-densification new trends to look out for

There are important caveats attached to the office sector fillip and they are conditions that are likely to prove permanent. The focus on high-quality and well-managed property has rarely been as strong, but now there is also need to cater for a post-lockdown workforce and to contribute to net zero goals.

What this means is that the trend for office space de-densification is only set to grow stronger and more important, with remote working firmly fixed as a corporate policy, as is the availability to offer infrastructure that caters better for employee wellbeing.

Also, properties that offer more along sustainability lines, both in terms of construction and day-to-day operation, are likely to be more attractive and increasing dictate demand as corporations and staff want and need to more to contribute to decarbonisation.

Markets challenges underline role of commercial lending expertise

Staying on the theme of unknown developments in Q3, the squeeze being put on the economy by the ongoing war in Ukraine and its impact of commodity prices and interest rates, and the continuing of impact of a botched Brexit, loom like a dark cloud over market forecasts. The longer both go on, the more damage they will do.

Therefore, the growing sense of optimism surrounding the commercial property market carries a heavy asterisk. Against this backdrop and in conditions that encourage a flight to quality, it is important that investors make sure they have the right commercial loan and mortgage lender.

To find out more about A&T Business Associates services for commercial property investors, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.