East Mids bucks national property investment trend to remain strong

  • Innes England's MD Matthew Hannah with CEO of the Nottingham Castle Trust Sara Blair-Manning at the company's Market Insite event 

THE East Midlands property market bucked the national trend and attracted £1.35bn in investment throughout 2019 – according to the region’s annual in-depth commercial property review published by Innes England.

The company’s 13th Market Insite report – which monitors trends in the regional property market focusing on Nottingham, Derby and Leicester – stated that investment into UK commercial property fell by more than 20% compared to the previous year. But, despite political uncertainty, the East Midlands remained level, highlighting the region’s attraction.

Across the region, the 2019 report showed:

  • Nottingham experienced record levels of investment, with the overall value of transactions totalling £513.2m – an increase of 126% on the previous year
  • Prime industrial rents hit new peaks in all three cities, which were driven by a lack of supply
  • Investment activity in Derby rebounded to its highest level since 2013/14, with the city seeing £281m of transactions 
  • The take-up of Grade A industrial space in Leicester increased by 96% rewarding those investors and developers who built speculative units

Matthew Hannah, managing director at Innes England, said: “2019 was turbulent and filled with political uncertainty but despite this, the East Midlands commercial property market is generally performing well. Most importantly, the region continues to house a range of outstanding businesses across a variety of sectors.

“Investment in the region remains strong, with notable transactions being 578,000 sq ft to the VF Corporation at Bardon in Leicestershire; Aver Properties’ forward purchase of the final phase of Henry Boot Developments’ Markham Vale North scheme at Chesterfield in Derbyshire; and the £120m sale and leaseback of the 1.8m sq ft Sports Direct headquarters at Shirebrook in Nottinghamshire.

“Alternative sector investment also continued to play a significant role, particularly in Nottingham thanks to the £45m forward purchase of the student accommodation scheme at York Place Nottingham by Brookfield Asset Management.

Industrial rents hit new peaks

“In all three cities, prime industrial rents hit new peaks, which were driven by limited availability and strong demand in the sector. There was also significant development in the industrial market, and Leicester experienced an incredible 96% increase in the take-up of Grade A industrial space.”

The decision from developers to build speculatively has proven to be valuable as the industrial sector was the standout performer in 2019. 

Scott Osborne, associate director at Innes England, said: “Industrial deals dominated across the region as investors continued to target the sector. In Leicester, activity was dominated by Grade A space lettings, which accounted for 64% of transactions – satisfying the demand from the big box logistics operators, as well as more local occupiers.

“The expanding ecommerce market also continued to drive rents, with prime rents in Nottingham, Leicester and Derby all reaching peaks levels of £7, £7 and £6.75 per sq ft respectively.” 

Cranes return to Nottingham

In Nottingham, the take-up of office space in 2019 fell below the 10-year average after record levels in the previous 12 months due to HMRC committing to 275,000 sq ft near Nottingham railway station.

“Despite this decrease, 2019 has seen the return of cranes to the city centre skyline, which is always a positive as it shows investment and redevelopment opportunities,” said Matthew. “There’s a great deal of activity taking place in Nottingham, which is being driven both privately and by the local authority.”

The report showed that the retail sector continued to face challenges due to changes in consumer habits. However, there were positive signs for Nottingham, Leicester and Derby, which all welcomed new retailers – including Hugo Boss and Cosy Club.

In Leicester, the most notable opening came from Sports Direct, which introduced its new elevated concept – combining the sports store, USC and Flannels all under one roof – at the former BHS in Gallowtree Gate. 

The St Martin’s area continued to be enhanced too, with Indian restaurant Mowgli and Canadian fast food chain Tim Hortons opening outlets. Work continues at the region’s premier out of town shopping destination Fosse Park, with the new £150m extension due to open towards the end of 2020.

Retail dominated by budget supermarkets

Retail activity in Nottingham was dominated by budget supermarkets, reflecting the trend nationwide. Lidl acquired sites at the former Beechdale Swimming Baths, and agreed a deal to buy the former Waitrose site in Wollaton. Aldi secured planning on a site at Edwalton with associated retail units. The largest retail deal came at Giltbrook Retail Park, with Marks and Spencer committing to a new 60,000 sq ft store. 

Jack Ward, associate director at Innes England, said: “The retail market across the country is facing challenges due to the online revolution and the East Midlands is no different. intu dominates the market in Derby, and it was great to see local companies Birds and Bear Coffee acquiring new space within the shopping centre, which highlights the opportunities for local retailers.”

Leicester’s hotel market is thriving – with a 154-room Novotel and six-storey Aparthotel by operator Adagio opening. These complement the neighbouring Long Harbour-backed 297-apartment PRS development, which completed in August. A new hotel is also being built above the Haymarket Shopping Centre, with the council funding improvements to the car park and shopping centre. There will also be the construction of a 67-bedroom Travelodge. 

Matthew said: “These are really important, high-quality developments for Leicester as they highlight significant investment in the city as a business and tourist destination.”

Read the full report