Refurb and development back on the menu in East Midlands
THE RETURN of refurbishment and development across the East Midlands to address tenant demand has been a defining change in the property market according to a report by Innes England.
The Innes England Market Insite report has been monitoring the regional property market for more than a decade – providing individual focuses on Nottingham, Derby and Leicester.
Across the region, the 2015 report highlights:
• Speculative development and refurbishment on the up across the region, rewarded by fast lets and increased rents
• High street vacancy rates dropped and Zone A rents returned to pre-recession levels
• Investment levels remain high as confidence continues to improve
• Record year for Derby industrial market as demand outstrips supply
Tim Garratt, managing director at Innes England, said: “In 2014, the East Midlands emerged as one of the strongest regional economies in the UK, with the property market indicative of that.
“We approached 2015 with a degree of uncertainty, with a General Election on the horizon but with a cautious optimism that the market would continue to improve throughout the year. After a heavy start, by mid-year the market picked up.”
The office market across the region has been a star performer with both Nottingham and Leicester recording take-up figures well ahead of the five-year average – 16 and 21 per cent respectively.
“One of the most significant indicators of a returned confidence is the continued trend towards speculative refurbishment – something which has been very much rewarded in the region’s office market,” added Tim.
“For example, the refurbishment at St Georges Tower in Leicester has been rewarded with a 50,000 sq ft letting to Hastings Direct and the council’s mixed-use scheme at New Walk/Welford Place has seen a pre-let of 60,000 sq ft to Matiolli Woods and 30,000 sq ft to IBM.
“The Derby office market is experiencing a lack of high quality stock – with no Grade A space left in the city centre following the letting of One Friar Gate Square to the University.”
Retail and leisure has also performed strongly across the region with Zone A rents reaching pre-recession levels in prime areas including Nottingham’s Clumber Street and intu Victoria Centre and vacancy rates decreased both in and out of town.
Tim said: “This has been another strong year for the retail and leisure sector across the East Midlands, with each city benefitting from a number of new names – a reflection on the increased consumer confidence.
“intu Properties’ purchase of Derby’s Westfield centre defined the city’s investment activity in 2014, but has given the retail sector a real boost this year with a arrival of a host of new restaurants and the recent planning consent to transform 42,000 sq ft of car parking at the centre into a new bowling and golf offering.
“We have also seen the completion of intu Victoria Centre’s £40m remodelling scheme and planning permission granted for the redevelopment of intu Broadmarsh, which is expected to start this year.”
Industrial activity across the East Midlands continues to be hampered by a lack of high quality stock, with speculative refurbishment rewarded.
“As with the office market, we have seen a rise in the speculative refurbishment – and now development, across the region. Sabre Park in Colwick, Nottingham underwent refurbishment and was quickly rewarded with a 45,000 sq ft let Century Logistics, for example,” added Tim.
“Derby had a record year within the industrial market, with take-up double that of the previous year to 1.1m sq ft but availability now sits at its lowest since 2007. This shortage of stock is seeing demand outstrip supply and a subsequent increase in both prime and secondary rents.
“Leicester’s industrial market continues to improve and is set to be boosted this year with the completion of at least two speculative distribution warehouses totalling 355,000 sq ft of new space.”
It is anticipated that 2016 will see the market across the East Midlands continue to improve, with development firmly back on the menu in both commercial and residential sectors.
Tim said: “The return of refurbishment and development to the market is a real signifier of confidence and I expect that to continue into 2016.
“A lack of stock continues to challenge the market though the balance is to be somewhat redressed with a number of new schemes across the region which will deliver high quality space.”