Investment opportunities for the East Midlands have reflected the investor movement from London and the south east to the regions, an annual commercial property review published by Innes England has revealed.
The 11th Market Insite report – which monitors trends in the regional property market focussing on Nottingham, Derby and Leicester – also identified that both industrial and retail sectors performed well.
Across the region, the 2017 report highlights:
- Prime industrial rents in Derby recorded a 26% growth in five years and rates peaked in Nottingham at their highest since 2008
- Prime retail rates continued to rise in Leicester and Nottingham
- Nottingham struck deals with HomeServe, Framework Housing and Siemens which helped to bolster the city’s office transactions
- Office supply dropped significantly across Derby, Nottingham and Leicester to concerning levels
Tim Garratt, managing director at Innes England said: “Despite a turbulent year potentially stunted by political uncertainty, the market in the East Midlands is relative healthy. Investors are keen to take advantage of opportunities in the region, a trend we are seeing in the form of several notable transactions this year.
“The £43 million investment into Sowden’s PRS (private rented sector) scheme in Leicester, major investments into regional premises from HomeServe and Siemens in Nottingham and a ten-year lease on a 70,000 sq ft new warehouse at Derby Commercial Park are prime examples.
“Unlike Derby and Leicester, Nottingham saw an increase in take-up across all sectors including office, industrial and retail. A growing interest from investment funds to capitalise on student accommodation opportunities in the city has helped the market to succeed.”
Across the region, the industrial sector in the East Midlands performed particularly well. The sector recorded a boost in prime rents in line with increased availability and take-up. Prime industrial rents in Derby rose to a record high – a 26.3% growth over the last five years and Nottingham’s industrial take-up rose 24% year on year.
“Leicester really cemented its position as a strategic distribution hub within with Midlands as rental values grew. Large acquisitions in the logistics sector really helped to drive the sector’s growth,” explained Tim.
Retail re-sites was a common theme from last year as Nottingham saw three national brands relocate to larger spaces. intu Victoria Centre’s £40 million development helped to boost rental rates to the highest rental record of £275 and out of town it has been the discount food retail sector which has dominated new developments.
Matt Hannah, head of agency for Innes England, added: “One of the biggest deals struck in the retail sector this year was the sale of the building in Nottingham’s Old Market Square currently occupied by Debenhams. The 196,604 sq ft premises was acquired by Altum Capital in a £25.8 million deal.
“Further investments by Next and Debenhams on the former Everards Brewery site in Leicester strengthened the importance of Fosse Retail Park as one of the region’s major out of town shopping centres.”
In contrast, the region’s office sector is reaching a critical point and is experiencing one of its biggest reductions in supply.
Nottingham recorded a 69% decrease in office supply in comparison to the peak levels recorded in 2012, Derby and Leicester’s office supply dropped to its lowest level in five years.
Matt said: “Limited city-centre office supply does remain one of the biggest challenges for the region. Deals signed on second-hand office space made up 96% of transactions in Derby and there is a lack of speculative development across the board. Finding good quality office space remains one of the biggest challenges affecting businesses and inward investment.
“At Innes England we’re looking forward to another positive year in the region. Property owners and tenants are having to think more creatively about how they operate and how to best invest in property.
“Overall we anticipate a steady growth in industrial. Retail will be tough and challenging but sales growth was positive over the important Christmas trading period, and the office sector needs more Grade A stock. Overall the region is thriving and the economy is benefiting from investors looking for opportunities outside the south east. This is something the East Midlands can – and should continue to – capitalise on.”
