Glimmers of light in a challenging market
4th May 2011
An uncertain economic climate is creating a challenging market for commercial property across all sectors.
The first quarter this year has seen commercial property struggle against fears of swingeing public sector cuts, while lack of government action over empty rate liability continues to put the burden on landlords and hamper new development.
The spectre of a double-dip recession has faded slightly with the news that the UK economic grew by 0.5% in the first three months of the year and a recent series of sales and lettings across Leicestershire is showing the way forward. Where the location and the price are right we have been able to complete both swiftly and successfully.
In the retail sector city centre movement remains difficult, with rental values reduced. Leicester’s prime retail area continues towards Highcross, with empty stores along Gallowtree Gate reflecting the downbeat picture in a less fashionable area. Market Street and High Street are holding up better, with these areas of the centre remaining attractive and providing inviting access to Highcross, where much of the action is focused.
Retail suburbs like Oadby, Wigston and Syston are holding up comparatively well. These provide a convenient alternative to a journey into the city, being typically smaller retail units serving local catchments with a sense of community.
Similarly the market towns – Melton, Market Harborough, Lutterworth and Loughborough - remain strong, again for their alternative provision of smaller shops, local appeal, with the bonus of an attractive setting.
The industrial sector reflects the lack of significant new building since before the recession, with end values currently not strong enough to cover building costs.
Fear of being saddled with empty rate liability is driving some highly competitive deals. As a consequence the volume of disposals has been relatively high albeit often at very competitive figures.
The specialised pubs, clubs and leisure sector remains difficult, with continued reluctance from lending institutions to provide finance having a negative impact on realisation levels. Rising prices and the biting economy are contributing to the ongoing problem, which, according to the British Beer and Pub Association, is seeing UK pub closures at the rate of 25 per week.
However, inquiries and demand levels are relatively good for well-located venues, or those with alternative use potential. Demand is still extremely price-sensitive and generally from cash purchasers, but we are currently involved with a number of disposals throughout the Midlands and have a large proportion of these under offer.
