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'Offices to homes' trend creating commercial property shortage - RICS

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'Offices to homes' trend creating commercial property shortage - RICS

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Published by Jon Land for 24dash.com in Housing and also in Local Government

'Offices to homes' trend creating commercial property shortage - RICS 'Offices to homes' trend creating commercial property shortage - RICS

The number of offices being sold with development rights for conversion into homes is leading to a shortage of commercial property, RICS warned today.

The trend is most apparent in London and the south but nationwide availability of commercial property is declining at an alarming rate. RICS says the lack of stock is pushing investors away from prime location and into ‘B’ grade commercial investments.

In its latest survey of chartered surveyors, RICS reports that 49% of respondents said 'office to homes' activity was having a ‘moderate’ impact on the commercial market, while almost one in five (net balance of 18%) said it was having a ‘substantial’ impact.

The picture across the country, however, was more polarised, with respondents in the north being less affected by permitted development rights (PDR) transactions with 49% saying it was having ‘no effect’ on the market, compared with 32% of respondents in the south saying it was ‘substantial’.

Further compounding shortage issues, the overall availability of commercial property declined at its fastest rate since the RICS commercial market series began in 1998 with a sharp fall in office and industrial space availability.

The lack of supply to the commercial market is also pushing investors away from prime location investments and towards ‘B’ grade investments, RICS said. In London and the south particularly, respondents reported that growing demand and the resulting drop in yields is encouraging investors to look for opportunities beyond prime locations.

Simon Rubinsohn, RICS chief economist, said: “The pressure in the office sector is being exacerbated particularly in popular locations by the gradual conversion of some secondary space into residential.

"While making a much needed contribution to the substantial shortfall of homes, there are understandable concerns that this could be creating a related problem for businesses looking expand their footprint as economic confidence grows.”

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