The year ahead for Channel Islands' commercial property

What might 2024 and the year ahead hold for the commercial property market both in the Channel Islands and the UK? Is commercial property more or less likely than other sectors to be affected by changes which might be brought about by a change in UK government? Might a new government bring about a refresh and some improvement? In this article, we consider these key issues and their potential effect on the sector.

The impact of inflation

Some analysts suggest that anticipated changes in this area commonly follow a lower-than-average path for the quarter prior to a UK general election, with a recovery likely in the subsequent period. This is less than positive news in view of the modest activity in commercial property markets over the past year.

In addition, the influences that led to falling property values and confidence since the disastrous mini budget of November 2022 (especially high inflation and interest rate rises) are still with us, although there are signs of a gradual improvement.

Inflation is currently running at 4 per cent in the UK, 6.3 per cent in Guernsey, and 7.5 per cent in Jersey, down from peaks of 11 per cent, 8.5 per cent and 12.7 per cent respectively. Commentators suggest that base rate may have peaked at 5.25 per cent where it has remained since August 2023.

The likelihood is that both inflation and borrowing costs will fall but may not return to the record-breaking low levels of the past 20 years any time soon. Might this convince investors to return to the market, especially considering there are other destabilising considerations such as conflicts in Europe and the Middle East?

Rental prospects

As we progress through 2024 we may see the reappearance of better rental prospects as falling inflation and borrowing costs could make office redevelopment schemes more financially feasible, which would be a welcome and positive sign to both landlords and tenants.

Repurposing office buildings in Guernsey

Guernsey has seen a recent trend of old office buildings being acquired and refurbished. Examples are Frances House, the former Island Bowl (Rock Health), No 1 Royal Terrace, Windsor House, and most recently the Town Mills complex which will be undergoing a similar renovation. 

According to developers behind these schemes, they have the vision required to bring to the market the type of space which modern occupiers require and the repurposing of old buildings needing updating particularly for ESG and 'green' requirements appear to have found a niche market.

Jersey property update

In Jersey, 2023 wasn't a record-breaker, but the Mourant Commercial Property team saw a consistent flow of work from those familiar with the attractive stability of the Jersey market.

Lease assignments and sub-lettings seem to have increased as businesses looked to expand or contract into new premises, which we take as a positive sign that our clients continue to want to do business from the Island. Indeed, Aztec's completion of its move into c60,000 square feet of flagship premises at the IFC is a clear sign of continued confidence in Jersey and its property market.