A total of 1.2m sq ft of space was acquired in the city – up from 891,000 sq ft and the second highest take-up on record, the annual Market Insite review by leading commercial property agents Innes England reveals.
The industrial sector continued to dominate Derbyshire’s results, accounting for 81% of all investment transactions, as the East Midlands saw overall transaction volumes drop at the end of last year amid the UK’s economic uncertainty.
Total industrial investment was £243m – more than a third (38%) up on the previous year and almost double the five-year rolling average. The impressive performance was down to large logistics deals completing in the first half of 2022.
One of the sites leading the way is St Modwen Park Derby, the flagship industrial and logistics development on Pride Park which has seen a huge amount of activity over the last 12 months, said Nick Hosking, Innes England director and head of agency and development in the city.
“Derby’s industrial figures have never been better and with demand continuing to outstrip supply we see that trend continuing this year – and hopefully with this continued activity in the market we’ll also see a good churn of second-hand stock,” said Nick.
The figures were revealed in Innes England’s 16th Market Insite report – presented virtually to an audience of hundreds of industry professionals – which monitors trends in the regional property market, focusing on Nottingham, Leicester and Derby.
In Derbyshire in 2022, the report highlighted:
- Total investment was just over £300m, slightly (23%) down on the previous year’s £391.1m but still 26% up on the five-year rolling average
- Large logistics deals included ICGs £101m purchase of two units totalling more than half a million sq ft at Mercia Park in Swadlincote; BMO’s purchase of Orion One and Two at Markham Vale for £44.5m; PCT Healthcare’s forward funding purchase of a purpose-built warehouse at Horizon 29 for £17.9m and Realterm Global’s £19m purchase of the DHL distribution centre in Long Eaton
- The office sector performed strongly, with take-up remaining at trend levels with 201,700 sq ft of lettings
- Retail investment transactions were significantly down, recording just £15.3m. Notable deals included Home Bargains’ purchase of its store and TK Maxx at Lordsmill Street for £6.25m, and Vertu Motors’ purchase of the car showroom on Sir Frank Whittle Road for £7.1m
- City retail activity centred on Derbion, with new retailers including Ted Baker, Boux Avenue, River Island and Jack Wills; while H&M upsized to a 25,000 sqft store
The city’s key employment sites performed well, with leading meal kit provider Hello Fresh acquiring space at the specialist 155-acre food production and distribution campus SmartParc, which will provide up to 2m sq ft of space.
And developer St Modwen has invested £50m in the local economy, building out 300,000 sq ft in the first phase – 200,000 sq ft of which has now been let, leaving just two units. A further 350,000 sq ft in the next phase will feature units from 27,000 sq ft to 145,000 sq ft, said Nick.
“It’s been encouraging to see activity on the city’s other key employment sites with Hello Fresh at SmartParc in Spondon and progress at Infinity Park to the south of the city with the Nuclear Advanced Manufacturing Research Centre and a 186,000 sq ft warehouse delivered for Project Ivory.”
But he added: “Notwithstanding the much-needed new industrial product coming forward, Derby’s local supply is still extremely thin on the ground, equating to only three months’ supply on current take-up levels.”
Derby’s office sector activity was dominated by smaller lettings less than 10,000 sq ft, which accounted for 75% of the year’s take-up. Activity was highest in the edge of city and out of town market but saw an overall lack of larger transactions, though a noticeable trend was for occupiers to upgrade premises at a lease event while also downsizing their requirements.
Director Craig Straw, head of Innes England’s business space agency team, said: “One trend that we continued to see with this readjustment of space was an upgrading in the quality of accommodation and, in certain sub-sectors, this has led to rental inflation.
“For example, Pride Park was targeted by a number of professional services occupiers looking to relocate from their city centre base and this imbalance of supply and demand for a typical 10,000 sq ft HQ led to rents rising from typically £14 to £16 psf.”
And he added: “New ways of working will continue to impact space requirements, with growing indications that some employers are starting to push for a more office-focused base. No doubt the best approach is to create a workplace which employees wish to visit and spend time in out of choice.”
In the retail sector, landlords and tenants had needed to adjust to the economic climate and the challenge of inflation, said Innes England managing director Matt Hannah, who highlighted the UK’s 17,000 shop closures in 2022 – the highest in the past five years.
But landlords and stakeholders in the East Midlands are repurposing spaces at pace, said Matt. Meanwhile, the retail warehouse market has made a swifter recovery, reflecting healthy tenant demand from value operators and large space retailers.
“The vacant Toys R Us at the Wyvern in Derby has been taken by Go Outdoors and M&S opened a new food hall with a Tim Hortons coffee drive-thru opposite on the prominent engine shed site,” said Matt. “Edge of town retail parks have a wider range of options for value creation and the owners of Bradshaw Retail Park in Derby are seeking to repurpose the site for 400 apartments with mixed use at ground floor, picking up on the city centre living market.”
The property market still has many reasons to be cheerful, despite the ‘challenges and threats’ it faces, Matt concluded. “With FTSE at an all-time high, inflation on the wane and interest rates close to peaking, there are reasons to give the market hope.”
