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Q2 commercial investment property trends to look out for in 2022

Some key commercial investment property trends were visible in Q1, with the market performing in line with new Covid-19 measures and more established sector behaviours. As Q2 begins, there are some interesting developments to keep an eye on.

Recent deals underline role of market’s key segment

The industrial sector, incorporating logistics facilities and distribution centres, continues to be a hot pick for investors, with demand remaining significant. Indicative of the need for this type of property are recent warehousing deals signed by supermarket chain Iceland and logistics major DPD.

Iceland have completed a 20-year deal for a 505,000 sq. ft distribution centre, while DPD have announced that they will open a new 60,000 sq. ft parcel facility later in the year. These companies join a host of others expanding their logistics property portfolios, including the likes of John Lewis and Amazon.

This growth is expected to continue throughout 2022, playing a major role in driving 9.6% growth in all-property returns for the year according to Colliers. Demand for large-size warehousing is set to frame segment performance, but other avenues of growth in this area are worth monitoring.

Warehousing sub-segment one to watch from Q2

Demand for small warehousing sites is currently soaring in London, with rents climbing as a result. This development is being fuelled by the growth of ultra-fast grocery delivery services, with these firms needing in-city warehousing to function.

As such, this ‘dark store’ property in the capital currently holds strong potential, while other major cities should be monitored for similar growth and opportunities, with London often a trendsetter for such development.

What investors need to know about new-look office space

Elsewhere, the office space is beginning to look more interesting. It is set to be one of the main beneficiaries of the so-called ‘return to normal’, following the lifting of Covid-19 restrictions and the return of commuters.

The stabilisation provided by steady employment and economic growth should have a positive impact on the office sector, with more and more people going back to work. That said, with homeworking now a permanent option for many businesses, the office space is taking on a new look, reorganised along de-densification, wellbeing and sustainability lines.

The potential is this area is heavily weighted in favour of properties that can adapt to these trends and accommodate the needs of the post-lockdown workforce and a more environmentally conscious corporate client base.

Sustainability to frame market behaviour and rent size

Expanding on the role of sustainability and returning to the growth of industrial property, the need to hit decarbonisation goals is beginning to dictate demand in the segment. Notably, the new DPD logistics warehouse will be constructed and operated on a net-zero basis.

As such, properties that meet sustainability stipulations, whether in warehousing or in other segments, will be more attractive to renters and achieve larger rents. This reality will clearly influence how investors approach the market.

Positive outlook for 2022 as conditions present forecasting challenges

Of course, as Q2 gets going and prospects for the commercial property market continue to improve, the caveat that must be placed against all forecasts is the impact of the war in Ukraine and how this will effect interest rates, borrowing and spending, among other things.

In such uncertain times, the market usually witnesses a flight to quality and commercial property investors should bear this in mind when sizing up opportunities. They should also make sure that 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.

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