LEICESTER MARKET SEES RISE IN INVESTMENT DESPITE NATIONAL DOWNTURN

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DESPITE a tumultuous economic year, Leicestershire’s commercial property investment market is seven per cent up from last year, bucking the national downturn, a new industry report reveals.

Our Market Insite 2024 report has shown that total completed transactions in Leicestershire stood at £182.1 million, although this still trailed the five-year average by some 42%. 

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, so it was good to see Leicester buck this trend on the back of strong performance from the alternatives sector and a bounce back in both retail and office activity. 

“As expected for Leicester, the industrial sector dominated activity, accounting for almost half of investment at 47% of the market share. Despite this, total industrial volumes were down 35% on the year before reaching only £85.6 million, its lowest level since 2017, and 56% below the five-year average.” 

Retail investment continued its recovery reaching £28.5m in 2023, while the ‘alternatives’ market – beyond the main offices, retail and industrial sectors – continued to prove resilient, recording £41m investment, up 36% year-on-year. 

“The office transactions sector also bounced back after two quiet years to reach £27m and is now trending 10% above the five-year average.” 

He added, ‘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, as well as describing the outlook for the year ahead. 

In Leicestershire, the stand-out deals included: 

  • The £29m purchase of the 297,300 sq ft Tesco chilled distribution facility at Hinckley by global logistics real estate group Realterm US. The £25m purchase of 155,100 sq ft of space at Meridian Leisure Park, by Greenridge Investment Management. Tenants include Vue Cinema, Hollywood Bowl, David Lloyd Health Clubs, and several restaurants. 

  • The largest city centre office disposal to an owner occupier was the freehold purchase of Bankfield House on New Walk by Planet Education Networks of 14,554 sq ft. The largest outside the centre was the letting of Granite House on Watermead Business Park, Thurmaston, where E.ON took 24,863 sq ft of space. 

Speaking on the office sector, our director Craig Straw, said: “While Leicester’s take-up figures for the office sector initially report a 50% increase on the previous year, it’s important to look at these findings within the larger context. Historically, Leicester’s numbers have had much higher volatility, with the previous year representing a 40% downward swing. With this in mind, we can still find significant confidence in the fact that the figures are broadly in line with the five-year average. 

“The findings also show that there is a noticeable lack of Grade A supply of office stock, with availability reducing to about 80% of the previous year’s figures. This is cause for some concern, particularly as the Grade A rental value is unlikely to be able to justify new development without public sector support. However, the local authority has acknowledged this and is looking at the options to pump some prime supply into the city.”  

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.” 

Peter Doleman, director and head of the Leicester agency, said the industrial market in its core areas remained 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 discussed the ‘big box’ market which continued to positively affect the region, with take-up of 1.25m sq ft in Leicestershire alone. The largest deal within this sector was the 493,000 sq ft ‘built to suit’ disposal to Persimmon’s timber frame subsidiary, Space4.  

Peter added: “There is still significant local demand for small units, both new and second-hand, illustrated by the Buyrite Group purchasing 31,000 sq ft on Telford Way, Coalville, and at Optimus Point in Glenfield, STO Express acquiring 44,000 sq ft. 

“Break up opportunities remain popular with the former Otis Lifts building now on the market as a number of independent industrial and office units.” 

Leicester’s supply has jumped by 40%, with the greatest increase being in second-hand space that now accounts for about two thirds of overall availability. Larger supply elements include the 340,000 sq ft speculatively built unit at Hinckley Park that is soon to be completed, and almost 1.2 million sq ft available at Griffin Park, the former Caterpillar plant at Desford.  

Peter added: “In longer-term availability, it is encouraging to see that there are a number of developer-led opportunities around the northern A46 perimeter road, together with Leicester City Council’s Local Plan proposals – to promote two new sites at Western Park and Beaumont Park, and a continuation of development at Ashton Green.” 

Sam Hall, associate director, discussed the strength of the food on-the-go and drive-thru market where demand was still at a ten-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.” 

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 learn more, and read the full report, visit:  

https://www.innes-england.com/assets/downloads/Market_Insite_Brochure_2024.pdf