THE take-up of industrial sites in Leicestershire increased by almost 39% in 2022 amid an unsettled year for commercial property deals, our new market report reveals.
The industrial sector continued to dominate the county’s market, as overall transaction volumes across the East Midlands dropped at the end of last year amid the UK’s economic uncertainty.
In Leicestershire, industrial investment accounted for 78% of the overall total with £132.9m transacted, according to our latest Market Insite report.
Meanwhile Leicestershire’s take-up, amounting to four million sq ft of space, was “excellent news”, said director Peter Doleman, “and can be partly explained, in view of the county’s exposure to the national distribution market and as a result, a location for a number of sites that cater for this specific massive market, most notably Magna Park.
“Of the total four million sq ft, it is astonishing to see that some two million of it was on Magna Park alone, with lettings last year to Iron Mountain, Rhenus Home Delivery and XPO, which took a building of 450,000 sq ft.”
The figures were revealed in Innes England’s 16th Market Insite report - presented virtually to an audience of hundreds of industry professionals - which monitors trends in the regional property market, focusing on Nottingham, Leicester and Derby.
Peter added: “The local market has still performed exceptionally well, with the letting of new speculative units on the Whittle Trading Estate in Whetstone, and the development by Westbrook Partners at Genesis Park in South Wigston which will be ready for occupation at the end of February.”
In Leicestershire in 2022, the report also highlighted:
· All four units in the final phase of the Leicester Distribution Park were let, including the largest, 150,000 sq ft to third party logistics operator XPO in October
· Stand-out industrial investments included Urban Logistics’ £41m purchase of the 670,000 sq ft Melton Distribution Centre, reflecting a yield of 6.67%, and its £33.75m purchase of DHL’s 230,000 sq ft distribution centre in Bardon (4.65% yield); and London Metric’s forward funding purchase of Cross Link 646 for £16m (4.5%)
· Forward funding deals in the living sector included Saxon House, the former HM Revenue and Customs building where Oblix Living has sold a 102-unit scheme for £25m and Cinnamon Care Collection’s £1.2m purchase of a 73-bed care home scheme on Uppingham Road from Charterpoint Senior Living
· Retail space has been dominated by national and international food and beverage operators - with new openings including Popeyes, Slim Chickens, Pret a Manger and Doner Shack
The report reveals how total investment in Leicestershire in 2022 fell back from the previous year - when several large logistic deals completed - with just under £170m of transactions, a significant 75% drop from £678.4m and 50% down on the five-year rolling average.
Availability in the dominant industrial sector appears ‘substantial’ at over 3.2 million sq ft, but two million sq ft of this is represented by buildings of more than 50,000 sq ft, rather than those that would more generally suit the local market, said Peter.
He added: “However, analysis suggests that there are smaller buildings available throughout Leicestershire, for example at Genesis Park.”
Leicester experienced limited activity in the office sector, with a dip from 429,000 sq ft to 245,000 sq ft, though this excludes the 89,000 sq ft Saxon House sale, as the new owners plan to convert it to residential use. Office activity was highest in the edge of city and out of town market but saw an overall lack of larger transactions, though a noticeable trend was for occupiers to upgrade premises at a lease event while also downsizing their requirements.
Director Craig Straw, head of Innes England’s business space agency team, said overall office take-up transactions were down across the region by about 25% following a bumper 2021.
He added: “New ways of working will continue to impact space requirements, with growing indications that some employers are starting to push for a more office-focused base.
“It will be interesting to see how things develop as in many sectors there is still a labour shortage with employers looking to secure those scarce resources on terms which suit the employee. No doubt the best approach is to create a workplace which employees wish to visit and spend time in out of choice.”
In the retail sector, landlords and tenants had needed to adjust to the economic climate and the challenge of inflation, said Innes England managing director Matt Hannah, who highlighted the UK’s 17,000 shop closures in 2022 - the highest in the past five years.
But landlords and stakeholders are repurposing these spaces at pace, said Matt, adding that the former Debenhams building in Leicester will be converted into 305 apartments, boosting the city centre living offer.
The most significant boost to city centres is the much-awaited rating reassessment which impacts this April and is an immediate reduction of retailers’ occupancy costs, said Matt.
“Some units we are marketing are showing a 65% drop in the rates payable or, for example, a reduction on one unit from £70,000 a year to £25,000,” he added.
The retail warehouse market has made a swifter recovery, with investment yields in the East Midlands between five and six per cent, reflecting healthy tenant demand from the discount sector and large space retailers.
Matt said: “Phases 1 and 2 at Fosse Park in Leicester represent one of the strongest trading locations in the sector and whilst phase 2, Fosse Park West, opened in 2021, it has attracted a complete line-up of tenants.
“They include Nike’s new concept store Nike Unite which is 10,000 sq ft and aims to help local communities connect more closely with sport with locally curated products.”
While transaction volumes across the East Midlands dropped at the end of last year, transaction activity is anticipated to return as investors quickly become acclimatised to the new norm, said Ben Robinson, head of Innes England’s investment consultancy.
Total investment volume in the region was £1.356 billion in 2022 - significantly down and nearly half (44%) of the previous year’s record-breaking volume. However, the figure was only slightly down (11.5%) on the five-year rolling average and just 6.75% down on the ten-year rolling average.