Occupier demand for commercial property in Wales fell at the end of 2025 and respondents expect rents and capital values to be lower this quarter, according to the latest Royal Institution of Chartered Surveyors (RICS) commercial property monitor.
But the outlook for 2026 as a whole appears more stable, it added.
A net balance of -32% of Welsh respondents reported a fall in overall occupier demand through the fourth quarter last year, which was the second lowest balance across all the UK regions. Demand for each of the subsectors (office, retail and industrial) was said to have declined, including industrial, whose net balance was negative for the first time since Q3 2023 (a net balance of -25%).
With regard to rental expectations, surveyors in Wales expect that rents will fall through the first quarter of 2026 with a net balance of -20% anticipating a decline. Breaking down the subsectors, a net balance of -6% of Welsh respondents anticipate that rents will decline for industrial space, a net balance of -40% expecting a decline for retail space and a net balance of -13% anticipate rents across office space falling.
However on the 12-month horizon, respondents in Wales are slightly more optimistic as a net balance of 4% of surveyors expect rents to rise at all-sector level during the course of 2026.
Regarding capital values, surveyors in Wales expect these to be fall through the first three months of 2026. Capital values for office space are expected to be flat whilst capital values for industrial space are anticipated to rise in Q1, albeit marginally so (a net balance of 6%). However in retail space a net balance of -47% of surveyors expect that capital values will fall over the next quarter, falling from the -13% that was seen in Q3 2025.
Respondents in Wales are slightly more optimistic on the 12-month outlook for capital values than they are in the short term. A net balance of 4% of respondents expect capital values to rise at all sector level over the year.
Chris Sutton of Sutton Consulting Limited in Cardiff said:
“There is now a crunch in terms of Grade A supply for both prime office and industrial property markets. Indurent are leading the industrial market with their next phase of 300,000 sq ft at Llanwern, Newport. There are large office relocation enquiries for Cardiff, typically seeking a smaller footprint but of a significantly higher standard. Rental growth is required to make new development viable; occupiers recognise rental growth will be required to stimulate new development.”
Stuart Hogg, Wales, Stuart Hogg Property Consultants, added:
“Consumer confidence remains weak and inflationary pressures are affecting demand, whilst higher employment costs and tax increases are restricting growth and business confidence. Property investors remain active seeking opportunities, but prime supply is low. Demand for freehold roadside, trade counter and industrial is strong.”
Commenting on the UK picture, RICS Head of Market Research & Analysis, Tarrant Parsons, said:
“The Q4 results suggest the UK commercial property market is beginning to find its footing after a prolonged period of adjustment. While near-term conditions remain relatively soft, there are tentative signs that sentiment may be stabilising, with a modest uptick in the proportion of respondents detecting early recovery signals. Most notably, expectations for rental and capital value growth have been upgraded across prime markets, suggesting respondents are becoming more confident in the medium-term outlook. Overall, the market seems to be shifting towards more cautious optimism, though elevated financing costs continue to temper the pace of any potential recovery.”