“2014 will be a year of continuing recovery in the M3/M27 property markets, as owners and occupiers take confidence in the recent economic upturn and the benign predictions for the next twelve months,” comments Mark Clancy, director of London Clancy.
“A dramatic turnaround in activity and values is not expected, but rather a steady improvement as the commercial property market in our region continues on an upward curve.
The availability of debt and equity capital will increase as lenders and investors take a more positive view on the commercial property market and this in turn will continue to strengthen an increasingly buoyant investment market, driving yields down in most sectors, and providing long awaited hope for competitively priced secondary stock.
Occupier demand is also improving as companies expand and consolidate, as illustrated by BMW purchasing the former Nokia HQ of 305,000 sq ft at Farnborough, Parcelforce moving into 107,000 sq ft warehousing in Basingstoke and NACCO centralising their office and warehouse operations in a new HQ at Frimley. The improved demand is creating pressure on the availability of stock in some areas, particularly with the increasing number of office to residential conversions, and new developments being hindered by escalating construction costs, a lack of employment land allocations, planning obstacles and in the case of offices, historic low rental levels.
Excessive business rates will also remain a significant issue for both commercial property owners and occupiers, not least through empty rates and despite the Chancellor’s “concessions” set out within the Autumn Statement. The cynical postponement of the 2015 Revaluation will prevent market realignment until 2017 at the earliest.
In 2014, we expect another strong performance from the industrial and warehouse property sector with the lack of modern stock putting pressure on Grade A rents to increase above the current levels of £9 per sq ft within the upper M3 corridor and £7.50 per sq ft in Southampton.
The office market will show the first signs of tangible recovery for many years, driven by increased demand, and rents are likely to at last see some improvement across both primary and secondary stock and particularly closer to London. Grade A headline rents should start to move upward from the current levels of between £17 – £20 per sq ft by the end of the year.
There are signs that 2014 may be a more stable year for town centre retailing as take up, particularly within secondary locations, starts to improve. At the same time, the retail warehousing market should benefit from improved housing market conditions. Confidence in out-of-town retailing will be sustained as well, as illustrated by the recent re-opening of the Whiteley Centre and the planned John Lewis At Home/Waitrose for Basingstoke.
The investment market within our region will reflect ongoing strong demand for prime opportunities and increasing interest in secondary space with conversion, refurbishment or alternative use potential driving down yields.
2014 will be a year when the commercial property market in our region is re-galvanised, as investors and occupiers take advantage of the improved economic conditions and the great value that remains on offer. 2014 will be a year for genuine optimism and as ever taking the right specialist regional property advice.
