The struggling commercial property construction market will not recover until 2023 – and the problem is exacerbated by the crisis affecting retail premises.
So says a study published this week, which finds that commercial property construction as a whole faces a long, slow recovery as output values drop and demand falters. And, according to the Castles in the Air report, from RSA – the UK’s largest commercial insurer – and the Centre for Economics and Business Research, the significant over-supply of retail property is making matters worse.
Retail saw a drop in construction output of 27% between 2007 and 2011, and demand for retail space remains subdued while vacancy rates continue to climb.
Of the eight cities examined in the report, only central London saw an increase in retail rents over the period, where average rents rose by 7%. At the same time, retail vacancy rates have eclipsed pre-crisis levels, rising from almost 8% in the second quarter of 2007 to over 10% in the same quarter of 2012, suggesting a sizeable over-supply of retail property.
The value of commercial real estate construction as a whole fell by as much as 32%, from £41bn to £28bn, between 2007 and 2011 – the lowest level in 10 years.
The report says that positive growth is not expected until 2014, and predicts that there will be no return to pre-crisis highs until 2023.