Affordability and accessibility to London and Europe are driving strong growth in key commercial sectors in Kent and Medway, according to the Kent Property Market Report 2017.
Produced by Caxtons Chartered Surveyors, Kent County Council and Locate in Kent, the report was launched at the Mercure Maidstone Great Danes Hotel yesterday (November 2).
The report says that the strength of the UK economy coupled with the county’s unique position and comparative affordability are driving the growth of Kent and Medway’s office, business park and industrial sectors.
There is also a high level of activity in housing markets, with a strong message going out to residential developers that the county is open for business and an attractive place to deliver new homes.
It adds that while Kent and Medway are not immune to the economic uncertainty caused by Brexit, business activity and occupier demand remain robust and have spread across the county in the last year.
The report states: “Kent is in an increasingly favourable business location, given the relatively more affordable cost of business space and homes in the county compared with London and other parts of the South East, and it will remain a vital gateway to continental Europe, regardless of the impact of Brexit.
“With substantial planned investment and developments – such as Ebbsfleet Garden City – of national scale, Kent and Medway contain some of the most exciting economic growth prospects in the South East.”
The report finds that the Industrial and Distribution sector has seen short-term benefits from the EU referendum result with the sharp fall in Sterling boosting exports. Strong demand and a dearth of development in the last decade contributed to an average prime rent rise in Kent and Medway of 9.4% in the last year.
Many of the county’s historic towns are finding it challenging to provide quality office space, a problem exacerbated by the on-going conversion of offices to residential use through permitted development rights with centres such as Maidstone, Sevenoaks, Dartford and Tunbridge Wells all seeing available stock reduced.
This is driving rental growth across many of the county’s towns. The average prime office rent across the main towns stands 11.2% ahead of the pre-financial crash peak, having risen 6.9% over the last year alone. Centres such as Dartford, Medway and Sittingbourne that have seen improved infrastructure coupled with regeneration and lost stock have seen sharp increases in rents.
Business parks have performed robustly, the report says, with rents largely staying stable. The launch of the North Kent Enterprise Zone taking in Kent Medical Campus, parts of Ebbsfleet Garden City and Innovation Park Medway at Rochester Airport has helped evolve and deepen the county’s science and medical expertise, building confidence for further development.
Kent and Medway has seen a marked improvement in retail performance. The average vacancy rate fell from 9.9% to 8.9% in 2016, far better than the national average, while the county’s average prime high street rent is growing at its fastest since 2008.
Towns with an expanding residential base such as Maidstone, Tonbridge and Dartford are seeing good demand, high streets in West Kent continue to perform well, and out of town shopping centres such as Bluewater continue to thrive.
House prices in the county grew at a faster rate than those in London over the 12 months to the end of August 2017 reflecting the growing pace of economic activity combined with expanding commuter demand.
The report says an acceleration in house prices in many of the coastal towns is noticeable. Affordable locations such as Margate and Dartford are seeing rises well in excess of those in the traditional west Kent commuter towns, with improved travel links and a consolidating sense of place attracting incomers.
Housing growth in Kent and Medway is expected to be at around 9,800 homes a year until 2031.
Key regeneration projects across the county are benefitting from £27m of Local Growth Fund support secured by the South East Local Enterprise Partnership from the Government’s Growth Deal Round Three.
Leisure and tourism remains a crucial pillar of the regional economy. Kent and Medway welcomed 60million visitors in 2016, contributing £3.6bn to the local economy and the industry accounts for 72,000 jobs, or 11% of total Kent employment.
The report also reveals that between September 2016 and September 2017, Locate in Kent, the county’s investment promotion agency, helped 56 companies find property amounting to 65,314m2 (703,039ft2) in the county, compared to 45,193m2 (486,462ft2) in 2016.
The agency is currently working on 300 projects, of which 244 had the potential requirement for property or land of up to 393,285m2 (4,233,323ft2).
Ron Roser, Chairman of Caxtons, said that in its fifth year as main sponsor of and contributor to the Kent Property Market Report, he was delighted that research showed Kent was in a positive position, with business activity and occupier demand remaining robust and extending across the county.
“The county is home to business locations with a critical mass of high growth industries, and towns with a cogent regeneration story, both providing investment options for investors,” he said.
“In addition, rents compare very favourably with other parts of the South East, with business park rents about a fifth lower. Increasing demand, alongside a shortage of good quality space in some areas has led to Caxtons’ Kent average prime office rent index rising by 25% in the last five years and 6.9% in the last 12 months.
“Structural change in the retail sector, alongside the county’s geographic position, has resulted in the good performance of the industrial and distribution sector. There is some speculative development underway, but this is unlikely to meet demand.
“In the retail sector, widespread rent re-basing post financial crisis has led to opportunities for independents to thrive in many Kent towns. This and growing populations in places such as Margate, Sevenoaks, Rochester and Dartford have resulted in many town centres successfully reinventing themselves.
“Housing delivery across the county grew in 2017. The relative affordability of homes in Kent compared with London and many parts of the South East, combined with significant improvements in rail connections, is driving demand. This is apparent in residential price movements over the last 12 months, with some areas of the county seeing price growth three times that of London.
“Of the five years of Caxtons’ sponsorship, this report shows more than ever how investment in infrastructure, regeneration and business space is translating into occupier demand and improved investment prospects.
“This year’s report reflects positivity across the property sector in the county and we look forward to a very busy year ahead.”
Kent County Council Cabinet Member for Economic Development Mark Dance added: “I appreciate that for businesses the county has not been left untouched by the economic uncertainty caused by Brexit.
“But I’m pleased to say that business activity and demand has remained strong and, importantly, we have seen a continual improvement in market confidence extending right across the county over the last year.
“Kent remains and is increasingly the business location of choice thanks to major infrastructure investment and forthcoming long-term opportunities opening up around the Thames Estuary and Ebbsfleet Garden City developments.
“The UK economy looks to slow into 2018 and I’m in no doubt that times will be tough, but Kent – indeed the UK as a whole – is resilient with a favourable business environment for investment.”
Paul Wookey, Chief Executive of Locate in Kent, added: “Interest from companies looking to move into the county or expand remains strong, and this puts increasing pressure on the reducing level of commercial stock across the whole of Kent.
“This high demand is unlikely to change over the next few years as Brexit negotiations continue, largely because of Kent’s fantastic connectivity, competitive costs, wide range of skills and exceptional quality of life.”
The Kent Property Market Report is supported by Clague Architects, Cripps, DHA Planning, Kreston Reeves, Handelsbanken and RICS.
