Commercial property construction is rising, according to the RICS Construction Survey for Q3.
The net balance of surveyors seeing a rise in private industrial workloads improved from 10% in Q2 to 22% in Q3 – a 13-year high, while the private commercial balance covering shops and offices rose from 22% to 39%.
On past form, the latter suggests that developers now anticipate occupier demand for commercial property being strong enough to push up all-property rental values sharply over the next nine months, perhaps by as much as 6%.
But economists at Capital Economics said: “That looks too strong. After all, it would require average monthly gains of almost 0.7% over that period, yet during the pre-credit crunch rental upswing the maximum monthly increase was only 0.5%.
“More fundamentally, although economic and occupier demand prospects have brightened, above-average vacancy rates in some segments will tend to limit the near-term pace of rental growth.
“Even so, the data has a distinctly positive tone, with both residential and commercial property activity reported to have risen strongly in Q3.”
Across the construction sector as a whole, Q3 saw the past workload balance improve for the fifth consecutive quarter, with the rise from 21% to 31% taking it to its highest level since Q2 2004 (32%).
The private housebuilding balance rose from 31% to 41%, a record for this survey’s 20-year history.
