A number of significant developments and growing demand for stock reflects steady confidence in the East Midlands commercial property market, according to a report by one of the region’s top consultancies.
The Innes England Market Insite report has been monitoring the regional property market for ten years – providing individual focuses on Leicester, Nottingham and Derby with its events a fixture on the region’s business calendar.
Across the region, the 2016 report highlights:
• Improvements to the public realm in city centres attracted further investment and new retailers
• Prime retail rates continued to rise in Nottingham while industrial prime headline rates reached a record high in Derby
• Leicester recorded record high take-up in its industrial sector
• Investment levels remain high as confidence continues to improve
Tim Garratt, managing director at Innes England, said: “Although 2016 was a year of uncertainty, the commercial sector has continued to succeed. There has been significant investment and development with Grade A space in high demand.
“For Innes England, 2016 was a strong year. We celebrated 25 years in business and grew our team of experts across the region.”
“Dwindling supply of Grade A office space was one of the biggest challenges faced by the market in 2016 and second-stock dominated the market because of this,” added Tim.
“For example, in Leicester second-hand space accounted for 87% of available space in the city, while sub-10,000 sq ft transactions accounted for 82% of activity in Derby.
Although a lack of stock has been a cause for concern in the region, there were a number of large transactions which brought with them a renewed confidence in the market.
Tim said: “In Nottingham there were a number of notable developer-led transactions, signposting the market’s intention to address low levels of supply, which will hopefully make a positive impact on the market in 2017.
“While in Leicester PRS for Music and PPL announced their decision to locate their new joint venture outside London in Mercury Place, citing the city’s talent pool and strong transport links as key benefits when looking at potential locations across the region.”
Retail and leisure has also performed strongly across the region.
intu Properties’ continued to dominate the retail sector in both Derby and Nottingham, with a number of new additions to its retail, food and leisure offerings, and more planned for 2017. intu also secured planning for intu Broadmarsh’s redevelopment scheme in Nottingham and announced a cinema as its anchor tenant.
Tim said: “This has been another strong year for the retail and leisure sector across the region. Although city centres are still dominating, the out of town market continues to be a success story, especially in Leicester where prime rates have increased year on year.”
Industrial activity across the East Midlands also continues to be challenged by a lack of high quality stock, with Leicester out-performing other cities thanks to the £126 million purchase of a new Amazon facility by South Korean investors.
Tim said: “Leicester experienced a record year within the industrial market, with take-up reaching nearly 3.3m sq ft in 2016. The letting to Amazon represents the largest transaction in the region, highlighting the importance of the distribution sector to the local economy.
“Once again, a lack of stock held back the industrial market in both Nottingham and Derby. Availability levels reached their lowest since 2007 in Derby, with a lack of high quality units continuing to be an issue. Similarly, in Nottingham 96% of all available industrial space is currently second hand, which does not meet the demand for high quality space.
Overall we anticipate that 2017 will see the East Midlands market continue to perform steadily. Some sectors might face a lack of confidence due to an uncertain political landscape, but the outlook is by no means all gloomy. Within an uncertain market lies opportunity for those willing to take it, and there is a lot of opportunity here in the East Midlands.