CHARTERED SURVEYOR APPROVED Steve Hawkins, Regional Managing Partner, Eddisons, takes stock of the commercial property market and squares up to a “noisy” year ahead.
The global and national events of 2022 have contributed to make 2023 an interesting and challenging year in leading to a variety of cost pressures, including inflation and interest rates adjustments. The property community is not immune from sharing the general public’s feeling of exhaustion with it all.
For Eddisons in 2023, the industrial sector has proved to be pretty resilient and the theme repeated across agency offices in the East and East Midlands is that lack of supply has helped to underpin both rents and prices.
For Peterborough, the industrial & logistics sector remained strong with prices holding up well. Prime rents for 30,000 sq ft plus are reaching £8 psf – some parties are quoting higher but these have yet to be achieved. Smaller units can exceed £10 psf for new space.
In addition, a number of investments have been sold this year and with the weight of money still in the market, Eddisons is actively acquisitive for a number of retained clients.
Eddisons’ acquisition of Budworth Hardcastle in 2022, has seen us bed down our presence in 2023 in the southern part of the Midlands Engine’s ‘Golden Triangle’ of the M1, M6 and western A14 corridor.
Not surprisingly, the general transaction churn here is dominated by the warehouse & industrial sector. For our two Northamptonshire offices, what’s inhibited the volume of transactions has been a lack of supply coming forward. However, from Q2 in 2023, there have been definite signs of more stock in play.
Power infrastructure supply to buildings is a major barrier to industrial relocations. Plus, while landlords accept the necessary investment required to meet Minimum Energy Efficiency Standards (MEES) in attracting new tenants, sellers often underestimate upgrade costs, giving prospective purchasers the opportunity to negotiate hard.
Turning to offices, generally, the regional office market remains tough but we look to the touchstone of our Central London office where there is a resurgence in deals with quality being the key.
In 2024, Peterborough’s office market could start to show improvement in demand for the better quality offerings.
In Cambridge, prime offices – those centred around railway stations – remain in demand. Secondary offices have struggled as companies maintain flexible working practices which see serviced and co-working offices grow in popularity.
The laboratory market is strong, with supply to the point of almost zero availability. Rents for new, fitted lab space have reached a £71 psf high. Occupiers are resorting to re-purposing older office and industrial buildings to satisfy immediate demand.
In May 2023, Eddisons acquired Lincoln’s Banks Long & Co – a firm active in the redevelopment of the City of Lincoln, as well as the county’s developing defence and agri-tech R&D sectors and burgeoning industrial & logistics sector.
The firm played a pivotal role in acquiring city centre retail location, The Waterside Centre for a JV between Lincolnshire Co-operative and Wykeland Group. It’s also continuing to advise on the reinvention of Lincoln Central Market and is the agent on the new Cornhill Market.
Well-located retail parks with solid tenant line-ups continue to show rental growth in the East Midlands. To achieve this, aggressive asset management with capital spending on refreshing the locations alongside introducing new tenants, are what can lead to solid rental growth.
Eddisons Lincoln has been actively acquiring well-let investments for retained clients including multi-lets and also single assets in established locations beyond the county, including Goole and Sheffield.
In summary – and more positively – in facing 2024, inflation appears to be cooling. The general consensus of opinion is that interest rates may have peaked, although they may stay uncomfortable for longer than expected.
As such, we are already seeing signs of increased interest in the investment market but those with cash may wait for further pain before making their move.
What is certain in facing the next twelve months is that we are going to suffer the noise associated with a General Election with which, even now, many are already fed up.
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