Investment in the UK retail property sector has surged by 35% year-on-year as falling interest rates and renewed confidence in the commercial property market draw investors back to the high street, according to the latest data from Rightmove.
Enquiries to commercial agents about retail listings on Rightmove hit their highest level since 2021, with high-street retail investment demand alone up by 56% compared to the same quarter last year.
The rebound marks a sharp reversal from this time last year, when investor appetite for retail property was down 15% annually amid lingering caution following the pandemic and high borrowing costs.
The Bank of England’s decision to lower the base rate for the second time this year in May has helped unlock capital across the commercial property sector.
SHARP GAINS
Overall demand to invest in commercial assets rose by 20% compared to Q2 2024, with sharp gains also recorded in the office and industrial markets.
Andy Miles, Rightmove’s Managing Director of Commercial Real Estate, says: “The growth of the industrial sector has been one of the main stories so far this year, but we can see a resurgence to invest in retail and office space too.
“Rate cuts are helping investment into commercial property, and after a period of decline it appears that retail and office spaces are becoming more attractive to invest in.”
And he adds: “Bank of England Base Rate has fallen as expected over the past 12 months and general consensus is that we’ll see further reductions this year. The reduction in Base Rate is much welcomed and coupled with a narrowing of interest rate margins, the overall cost of borrowing continues to fall making investment more attractive.”
INVESTOR INTEREST
Decreasing availability may also be fuelling renewed investor interest. The number of retail properties listed for investment is down 4% year-on-year, continuing a trend that began at the start of 2024.
Demand from occupiers is also recovering. Enquiries to lease retail space rose by 10% year-on-year, as more businesses seek physical premises despite the ongoing expansion of online shopping.
BACK TO THE OFFICE
The office market is showing similar signs of recovery. Investor demand for office space rose by 65% compared to the same period last year, after falling 13% year-on-year in Q2 2024. Leasing demand is also up 12%, with London office hotspots Westminster and the City of London seeing even higher increases at 29% and 21% respectively.
The industrial sector remains the standout performer. Investment demand more than doubled over the year (+105%), while leasing demand jumped by 41%, driven by continued strength in logistics and warehousing.
John Mitchell, Managing Director at Christie Finance, says: “We continue to see strong levels of demand from investors across a broad spectrum of asset classes with recent transactions spanning the leisure and hospitality, retail and student accommodation sectors.”
