Leicestershire Commercial Property Market - Qtr 1, 2008
14th February 2008
.jpg)
“Confidence” is a word that a lot of people in the commercial property market are talking about reports Malcolm Grayson, partner at Andrew & Ashwell.
2007 was a strong year through to December although the last quarter weathered much turbulence within the financial markets. However, valuers and investment surveyors are now factoring market uncertainty into yields which have adjusted upwards during this first quarter of 2008. This is not such a bad situation for those (and there are many) who are seeking to buy commercial property. Competition to buy property throughout the country has been bullish in recent years due to a combination of high demand and under supply. Demand and supply has still not materially changed, however confidence is waning.
Commercial property market conditions for 2008 are difficult to predict. Economic growth is set to slow, while the cost and availability of borrowing might prevent some occupiers getting into the freehold market at all. Arguably, this could result in more demand for leasehold property.
Conversely, interest rates have started to fall (currently 5.25%), and they are predicted to reduce further during the course of the year. This should bring property yields down. Despite the recent credit crunch, there are many wealthy people and companies in the market to buy a bargain. The banks remain keen to loan, particularly to their established clients with proven records and relatively low gearing. Therefore, 2008 has the potential for opportunity.
Leicester and the surrounding County shows a lot of promise. The high level of investment in the City Centre, largely attributed to Leicester Regeneration Company, has lifted the profile of the city. Opening of the Shires extension will have a massive impact on the City’s transformation, which indirectly is good for all sectors.
One of Leicestershire greatest attributes is its diversity. The manufacturing sector has always been a large part of the local economy, although much of the industrial building stock is now used for logistics and warehousing. The county has made a smooth transition between these uses where it offers a central location within the UK benefiting from outstanding road communications that are ideal for distribution. Land for new commercial development opportunities is in sort supply whilst demand remains high. As a consequence, demand across the county rather than just prime positions is hotly contested.
Last year Andrew & Ashwell acquired the Old Dalby Business Park for HXR II UK Ltd, comprising 39 acres of land with 750,000 sq ft of industrial buildings. The site is virtually fully occupied, following a sale of 70,000 sq ft and similar sized lettings. Planning permission on this site was recently granted to allow major improvements, which are scheduled to start in March 2008. This will provide small business units either for sale or to let, along with site infrastructure improvements to create better use of the space and a professional “Business Park” environment.
The GEC site at Melton Road, Leicester has just come to the market and this offers an outstanding development opportunity totalling 18.8 acres. This is likely to generate strong interest, although the obligation to pay full empty business rates from 1st April is a significant and added burden to the development process.
Leicestershire’s office market continues to mature. The county is dotted with offices schemes, which like the industrial market, have sprung up in secondary locations as a result of low land supply elsewhere. As this sector grows this should lead to future demand for larger premises which is good news for the city and county economy. Central Park at Lutterworth has been a good news story for the office sector where approximately 20,000 sq ft was sold last year, with interest in the remaining space being strong. A planning application has been submitted for a further 20,000 sq ft which will leave circa 2 acres for the last phase of the scheme.
Malcolm Grayson comments “These small office schemes away from the very large parks are often preferred by small business. The occupiers like a high quality environment while avoiding the traffic congestion and long commutes”. He continues “Leicestershire has a lot to look forward to during this year even if the economy does take a downturn. The county is fundamentally a good place to invest and we are looking forward to real opportunities coming to the market”.