Demand for commercial property remained high in Wales, while available office, retail and industrial space fell for the fifth consecutive period, according to the latest RICS Commercial Market Survey.

Over the next three months, 25 per cent more respondents expect rents to rise, with industrial and office rents expected to rise at the fastest rate.

Across the whole of the UK, but excluding the capital, 95 per cent of respondents believe that current commercial market valuations are either at or below fair value (roughly unchanged since Q1 2015). However, in London 50 per cent of contributors now feel that commercial property valuations are ‘expensive’ - an increase from 45 per cent in Q1.

Haydn Thomas, of Hutchings and Thomas Chartered Surveyors, Newport, said: “ There are definitely signs that the commercial property market in South Wales is improving, albeit gradually. An issue which is on the horizon, especially outside the capital, is the lack of significant development especially in the grade A office sector.

“The tipping point at which increasing demand and rents turns into development is hard to judge and this is a concern for the region. The improving market must be tempered against the latest announcements on savings which the UK Government Chancellor George Osborne says have to be made in the public sector, which will impact on the national and regional economy. It is hoped that the improving private sector can grow sufficiently to counter this.

“That said the announcement by General Dynamics that they are to launch a major manufacturing facility in Merthyr Tydfil creating circa 250 skilled jobs is most welcome and hopefully symptomatic of future investments in the upper valleys area where historically there has been significant demand from indigenous companies and inward investors.”

Michael Bruce, MRICS in Cardiff, said: “The recovery in South Wales is still lagging behind many other parts of the UK but there are signs of improvement. Enquiries are improving and better quality commercial stock is being taken, but the general level of rents being achieved is unlikely to spur any speculative office development away from Cardiff, or any speculative development of any sort in the remainder of South Wales any time soon.”

Simon Rubinsohn, RICS chief economist, said: “The results of the latest survey suggest the price of commercial real estate will continue to move higher over the next 12 months and quite possibly by another ten per cent. Fortunately, the strength of the occupier market is providing some underlying support for the market. Indeed, the feedback we are getting from around the country tells us that the economic expansion is continuing to broaden out with both tenant demand, and just as significantly, investor interest, rising in all areas.”

Interestingly, given the upcoming referendum, when asked if Britain leaving the EU would have significant negative implications for the commercial property market, 44 per cent of respondents felt it would, while 32 per cent believed it would not and 24 per cent reported they did not know at this point.