The industrial and retail sectors have been the star performers in the commercial property market in the Eastern region with the spotlight off the office market except in select locations where speculative building is making a return.
That’s the verdict reached by Barker Storey Matthews in reviewing the evidence of the deals done in 2017 by its four agency offices which span the region from operational co-locations in Cambridge, Huntingdon, Peterborough and Bury St Edmunds.
In compiling its year end review of 2017 and preview of the market in 2018, the property agency concentrates on the ‘sheds and shops’ sectors where occupier demand remains strong against the backdrop of evolving markets in both sectors.
The impact of the 2007/2008 financial crisis is playing out in the ‘shed’ sector a decade on. This sees a lag in supply of modern units where warehouse and depot facilities, as well as industrial and manufacturing buildings of significant size and scale, are sought to accommodate the increasingly automated nature of logistics and distribution fulfilment.
Occupier demand for industrial, warehousing and distribution space has remained relatively strong in 2017 and is expected to maintain at this level in 2018. A shortage, along with improved trading conditions, has driven rents and capital values – the latter of which has been further pushed by falling yields.
The appetite for investment in industrial property in the Eastern region has continued apace in 2017 and prices are now, in most cases, substantially higher than they were only three to four years ago.
The substantial works to improve and upgrade the A14 between Cambridge and Huntingdon have passed significant milestones in the past twelve months.
Indigenous businesses and those planning moves to the area are seeing beyond the inconvenience of the current roadworks in taking the long view. There are substantial commercial benefits to be gained on completion of the works to modernise this strategic transport route between key business – and residential – locations and the market towns which feed in to the A14 spine.
The retail market is changing in response to changing shopping habits. The Internet as a marketplace has led to pressures on the high street with many retailers downsizing floor areas and store numbers. The discounter market remains strong but consolidation is in the air as 2017 ends and 2018 begins as operators’ property portfolios mature.
‘Healthy’ high streets have started to evolve with the food and beverage sector coming to the fore in regional locations that were once seen as non-prime by the operators, according to Barker Storey Matthews’ experience of 2017.
Cambridge retail keeps apace with the shifting of shopping and dining habits. A ‘foodie’ boom has fanned out from the historical city centre core to the areas of Burleigh Street and Fitzroy Street. Both streets are thoroughfares to the Grafton Centre where owner, LGIM Real Assets (Legal & General) unveiled a new look in the autumn (2017) following a £28 million investment on refurbishment.
To commercial property investors, Barker Storey Matthews would always make the case in appreciating the value of Cambridge’s neighbourhood districts – such as Mill Road, where independent retailers still make their mark – in positioning retail in the city.
The Cambridge commercial property is dominated by its office and laboratory market. In 2017, there was the sense of the city’s market catching up with itself, with pre-let appetites being fulfilled by the newly-built and being-built stock.
Yet there is still a question mark about suitable stock availability to fulfill the demand of the natural churn of enquiries, particular those looking for larger premises. Speculative building opportunities occur where the development pipeline and land supply will permit and provide.
The market has been calmer in the face of the coming year with a noticeable air of caution, perhaps due to the lack of clarity surrounding the ongoing Brexit negotiations. But it will only take a couple of big enquiries from international blue chip corporates to disrupt the Cambridge office market scene and reduce supply to historically low levels.
Commenting on 2017’s industrial and retail star performers in the region’s commercial property market, Ben Green, Director, Barker Storey Matthews Cambridge, says, “The spotlight has been on sheds and shops this year in response to our changing lifestyles which are, increasingly, steered by technology.
“It is hard to see how this will change in the coming year unless household expenditure is severely curtailed.
“However, consumer habits of successive generations are becoming deeply ingrained. This would appear to militate against a dramatic compromise in our day-to-day lifestyles in the short to medium term and so property demand for sheds and shops is likely to endure for the rest of the decade.”
Referencing its Peterborough office in the industrial units market in the region, the property agency points to the return of speculative building this year and the speed with which occupiers are committing across a broad range of sizes.
Newark East on Newark Road is Peterborough’s first speculative industrial development for almost a decade in the city’s Eastern Industry district. The development was launched to market at the end of last year (2016) and by the spring (2017) almost half the available space was under offer for occupation by the summer.
Launched in November (2017), the second phase of Eagle Business Park in Yaxley has 3.5 acres under offer and qualified interest from ten parties in remaining units by early December.
Traditional retail pitches in and around Peterborough’s Cathedral Square are morphing to become more leisure and lifestyle-led areas and attracting restaurant and café occupiers.
Peterborough has a low vacancy rate for retail – 4.5 per cent when the national average is 12 per cent. This, in part, reflects the compact nature of the central shopping area as well as the efforts of the city council and private stakeholders to improve the trading environment for consumers and operators alike.
