THE INDUSTRIAL sector has driven the Nottinghamshire commercial property investment market in 2023, accounting for almost two thirds of all activity, a new report reveals.
Our Market Insite 2024 report has shown that total completed transactions in Nottinghamshire last year stood at £337 million.
That was against a national backdrop of commercial property investment activity projected to total around £37 billion in 2023 – a drop of 39% on the previous year.
Ben Robinson, our director and head of investment, said: “It’s fair to say that the UK market in 2023 was relatively challenging, with transaction volumes down across the board - testing levels not seen since 2012.
“The strong headwinds of high interest rates translating to high borrowing costs, inflationary pressures and geopolitical uncertainty have caused many investors to slow down or pause decisions to buy and sell.”
However, despite total investment volumes in Nottingham dropping by a third, Ben said it was encouraging that the £336m figure trailed the five-year average by only 12%.
The industrial sector dominated the market accounting for 63% of total activity and helped by the completion of some large logistics deals.
Industrial volumes were up by 145% last year, sitting at £212m - trending 33% above the five-year average.
The retail sector remained relatively stable at 14% down on 2022 at £71m while office investment in Nottingham, after three good years, fell to £29m representing a 55% drop year-on-year.
Meanwhile, the ‘alternatives’ sector – beyond the main offices, retail and industrial sectors, having been the main driver in 2022, experienced a significant drop off in investor demand.
Overall prime yields continued to drift out over the year by 25 to 50 basis points.
The findings were revealed to an audience of industry professionals at our 17th annual Market Insite event - the first in-person event for four years.
The report details key deals, analysis, and trends in commercial property across the Midlands and describes the outlook for the year ahead.
In Nottinghamshire, the stand-out deals included:
- Brookfield Asset Management’s purchase of the 1.2m sq ft former Wilko’s distribution centre in Worksop, from DHL Supply chain for £88m, the largest completed transaction with the purchase price representing a net yield of 5.75%
- EssilorLuxottica, owners of Vision Express, took on 100,845 sq ft on the new industrial scheme at Fairham Business Park
- The largest retail investment transaction was Columbia Threadneedle’s purchase of Castle Marina Retail Park in Nottingham from Coal Pension Trustees for £43.5m. The 188,600 sq ft park has 13 units, with tenants including Currys, B&M Retail and DFS
- Cubo’s acquisition of 23,460 sq ft of offices at Standard Court to expand its managed workspace offering in the city.
Peter Doleman, director and Leicester head of agency, commented: “the industrial market within our core areas remains remarkably resilient, with Derby and Leicester’s take-up above the ten-year average for the third consecutive year. Nottingham remained in line with its longer-term average.”
Peter said the big box market continues to positively affect the region, with take-up of 1.25 million sq ft in Leicestershire alone, with the largest deal being the 493,000 sq ft built to suit deal by Persimmon’s timber frame subsidiary in Loughborough.
Elsewhere, HelloFresh took 430,000 sq ft in Spondon and in Nottingham, Vision Express moved to a new warehouse of 100,845 sq ft on the Fairham Business Park.
Peter added: “In Nottingham, supply edged upwards, rising to 1.4 million sq ft - its highest for seven years - with the largest building being Nottingham 360 on Firth Way, totalling 362,000 sq ft.
“Off the back of this very positive marketplace, rents and prices generally have continued to trickle upwards.”
Speaking on the office sector, our director and Nottingham office agency head Craig Straw said: “While other East Midlands areas like Leicester and Derby are suffering from a notable lack of Grade A office space, Nottingham’s supply enjoyed a healthy boost, now making up about 40% of its current stock and putting its office market in a strong position this year.”
Craig said there was a continuing trend in upgrading office space with a focus on wrap around services with a view to attracting employees back to in-person workdays rather than working from home.
The supply of Grade A office space was also boosted by The Pod’s owners Columbia Threadneedle investing in a seven-figure refurbishment that reflected its ESG commitments.
Craig added: “The most significant dynamic for the office market remains the impact of hybrid working policy, providing employees with the flexibility and support to work from home while still encouraging visits to the office for the benefits this undoubtedly brings.”
Sam Hall, associate director, discussed the strength of the food-on-the-go and drive-thru market, where demand was still at a 10-year high, despite a decrease in openings due to rising construction costs and planning process delays.
Sam also discussed the fall of retail giant Wilkos in 2023, saying it was not indicative of a larger trend, as other discount retailers had taken on 120 of its stores. He added: “Out of town retail and retail parks have remained resilient across 2023, with discount retailers occupying space in both storefronts and warehousing.”
While the UK’s retail sector saw 120,000 job losses and more than 10,000 shop closures, national retail vacancy rates across high streets, shopping centres and retail parks reached their lowest point since the first half of 2021, said Sam.
Nottingham city centre’s take-up was driven by food, beverage and leisure operators, with new openings by Pizza Pilgrims,Rudy’s Pizza, as well as Box Sports Bar.
Sam said: “The high street is not dead, but it will require retailers to breathe new life into it, as well as their own concepts, to ensure their continued success.”
He added that a notable trend in 2023 was a surge in electric vehicle charging point operators seeking sites and opportunities, leading to a 50% year-on-year increase in available charging points in the UK.
Matt Hannah, our managing director, said: “The industrial market has continued to deliver strong results with good occupier demand and rising rents across the region generating confidence for investors and developers to support new supply. Looking at the bigger picture, all property investment volumes reflected a lack of activity in the market and investor confidence needs to improve to drive more activity across the region.
“As always, our team has done an incredible job of collating the data. We are looking forward to 2024 and what that brings as we continue to expand our team in both the East and West Midlands.”
To read Innes England’s Market Insite report, visit: https://www.innes-england.com/assets/downloads/Market_Insite_Brochure_2024.pdf