East of England is hottest region for commercial real estate

The East of England is the most in demand region of Britain for both commercial property purchases and rentals, analysis from Sirius Property Finance has revealed.

Nearly half 44% of all commercial investment opportunities across the region have already been snapped up by investors, while 24% of all commercial lets have already found tenants.

This strong demand is apparently driven by low investment costs and high rental returns.

Across Britain as a whole, the average price of commercial real estate has fallen by -12.7% over the last year, while rents are up 4.9% annually.

Across the East of England however, the typical price of commercial real estate has fallen by -9.2%, while the average rent achieved is up by 19.3%.

Kimberley Gates, head of corporate partnerships at Sirius Property Finance, said: “It’s certainly a bit of a mixed picture across the current commercial real estate sector and while a robust level of investor demand remains, upward price growth across some regions has impacted their appetite for investment, even when rental values have also increased notably.

“In contrast, there are some regions, such as the East of England, that offer the ideal balance of softening property prices along with strengthening rents and it’s no surprise that demand in these regions is substantially higher.

“With the commercial sector having largely recovered from the impact of the pandemic, we expect to see demand continue to return to the sector, although this activity will be largely focussed in areas that offer the best bang for buck in what is becoming an increasingly difficult economic and financial landscape.”

The South West and South East also rank in the top three for both commercial sales and rental demand, while the North East is the least in demand region.

In contrast to the East of England, the average commercial rent is up 42.8% across the North East, second only to the North West where it has climbed by 102.1%.

What’s more, the North East has also seen the largest increase in the average price of commercial real estate, climbing 15.9% in the last year, versus an average decline of 12.7% across Britain as a whole.

Sarah Coles, head of personal finance, Hargreaves Lansdown, said: “Zoopla has spotted green shoots in the property market, but at this stage we can’t rule out a lethal frost. There are no guarantees that the spring is set for the kind of flourishing market the estate agents are hoping for.

“There are some real positives, with more sellers coming to the market, which is enabling a reasonably steady stream of sales.

“Bank of England figures have also shown that mortgage approvals for the coming months have picked up very slightly, and, assuming the current bump in mortgage rates is a temporary blip, the market could benefit from further falls in rates.

“Meanwhile, the strength in the labour market and rapidly rising rents are keeping a floor under demand.”