At its annual property breakfast, held today at The Royal Southampton Yacht Club, CBRE examined the current trends in the UK property market for the first half of 2013, which overall has seen a return to leasing volumes well above long term averages, according to its latest research. With substantial amounts of space under offer and an increase in enquiries being seen across the country, 2013 is set to be the strongest year for occupier activity since the recession started.
Early analysis of the data indicates that in the first six months of this year 65,000 sq ft has been acquired for occupation across Southampton reflecting an improvement in sentiment across the City and M27 corridor. When compared to other regional centres, Southampton is still widely seen as offering some of the best value space across the country, particularly on a ‘cost per desk’ basis. Investment demand has focused on investors, many from outside the region, making strategic acquisitions of short term leases, which once expired, will see the buildings undergo a change of use or substantial refurbishment.
Commenting on the research James Brounger, Managing Director, CBRE South Central said: “The office market in Southampton is poised for improvement; there are signs that occupational demand is starting to strengthen and the rate of take up is also increasing. This is bringing greater confidence to the investment market and most particularly for short income investments resulting in more activity in this sector of the market. In addition the supply of vacant buildings is reducing – the best space continues to let and some of the oldest, least lettable buildings are currently undergoing use changes exploiting residential and student demand.”
Looking at the country as a whole, stronger regional economic growth prospects, particularly within the service sector, is now beginning to be reflected in an upturn in enquiries and deals done in the South East outside Central London and many of the UK’s largest cities.
Demand for Grade A space across all markets continues to squeeze supply with a restricted completion pipeline. Many of the regional markets continue to have significant quantities of poor quality secondary/tertiary stock, which for the English cities, may provide an opportunity under the Government’s new permitted development rights for conversion from office to residential, though this too depends on sales pricing and the demand for rented stock. In addition to the offices research, both the residential and auction teams gave overviews of their respective markets.
CBRE’s Head of Development for the South Central Region, Mark Budden spoke about the positive movement in the land market this year with many of the housebuilders now fully refinanced and looking to acquire both immediate land and strategic land to boost their medium to long term land supply. This, coupled with the Government’s Help to Buy scheme, has seen a much more buoyant development market across the South as evidenced by increased transactional activity last year with eight major development sites sold for an aggregate of £80m and with a strengthening picture for this year and next with land sales in the pipeline worth hundreds of millions of pounds.
Chris Mills, Executive Director of CBRE’s Commercial Auction Team gave an insight into the UK auctions market, which highlighted the extent to which commercial auctions can match and often exceed sale prices achieved in private treaty sales for investments in all sectors and also for vacant or part vacant properties that are correctly priced, in unique locations or that offer good asset management opportunities for entrepreneurial investors. There has been strong demand for well located investments, particularly those located in the South and South East of the country, leased at current rental levels with reasonable lease lengths, underpinned by the buying power of entrepreneurial buyers utilising cash resources.
