While the residential property market remains buoyant there has been a collapse in the commercial market this year, with the value of transactions plunging by 71 per cent according to recent data.

Search Acumen’s Commercial Real Estate Insight report shows that property transactions in England and Wales completed by commercial buyers fell to £15.1bn between late March and September this year, down from £52.1bn in the equivalent period the year before.

Over this same period, the number of transactions dropped by 73 per cent, falling to 23,036 in 2020 from 84,943 in the previous year.

These figures coincide with the start of the first national lockdown which closed significant parts of the economy in a bid to curb transmission of coronavirus.

The report identifies areas that have seen some of the sharpest falls in activity.  Southhampton has seen the biggest drop, with the value of commercial property transactions falling by 96 per cent, from £288.7m in 2019 to just £12.3m in 2020. 

Swindon has seen a 92 per cent decline, with the value of these transactions falling from £166.1m to £13.3m ,while York has experienced a 88 per cent fall (from £158.3m in 2019 to £18.3m this year). 

The sharp fall in the value and number of transactions is being partly driven by a contraction in demand for offices and rental properties due to the rapid switch to home working practices and a flight of people from inner city areas.

Strict restrictions imposed on England and Wales’s property market between March and the middle of May 2020 also put downward pressure on activity levels.

However some  areas, mainly in the north east of England, have seen the value of commercial transactions rise.The research suggests this may be from commercial buyers looking beyond Greater London for returns on their investments.

County Durham, Tyne and Wear and Northumberland all saw rises in the value of transactions since lockdown, compared to the previous year. Country Durham was the highest, at 69 per cent, while Tyne and Wear and Northumberland saw rises of 16 per cent and 6 per cent respectively. 

This compares to a 77 per cent drop in the value of property transactions undertaken by commercial buyers in Greater London over the same period. In the capital the value of these transactions has dropped from £20.3bn in 2019 to just £4.7bn this year.

Search Acumen commercial real estate business development manager Caroline Robinson says: “This data reveals the scale of the impact the coronavirus pandemic and resulting lockdown responses have had on buying appetite from commercial investors across England and Wales.

“Companies are drawing up long-term strategies to incorporate remote working, with a large part of these plans including a reduction in their real estate footprint or downsizing to smaller workspaces to align with lower office footfall. 

“The potential to fill large-scale residential housing projects, often found in cities, is decreasing due to consumers looking to relocate to areas outside city centres.

“Commercial buyers are already responding to the prospect of lower long-term demand by looking at areas that have the potential to provide returns in the future, with the North East of England in particular experiencing an inflow of investor capital.

“The commercial real estate sector needs to urgently prepare for the impact that widespread adoption of remote working practices and extended periods of social distancing measures may have on future occupancy rates. Developers must innovate and ensure properties meet firms’ and investors’ new requirements.”