UK Commercial Property News

Wednesday, 1 September 2010

Southampton Looks Ahead

While the office market in Southampton is at a low ebb, the city council is offering its own positive image for the future. It has appointed David Luck Associates, urban planners, for an ambitious development plan to be achieved by 2026. This envisages 325,150 sq.metres (3.5 million sq.ft.) of offices, a substantial amount of retailing and 5,000 residential units.

The focus of this will be a 133 acre site from the train station to the Royal Pier on the Southampton waterfront which is likely to be the first part of the scheme. One element in the council’s ambitions has been achieved with a £7.2 million Arts Council grant for a new arts complex, which will be built by Grosvenor as part of a wider scheme on the site of the former Tyrrell and Green building in Guildhall Square at the heart of a new cultural quarter. Councillor Royston Smith, leader of the council, commented: “As well as the emerging centre, we are on course for a massive new retail centre with Watermark WestQuay, as well as development of the Royal Pier.”

As far as the current office market is concerned, Jason Webb of King Sturge reports a dormant office market in which take up has been only 6,317 sq.metres (68,000 sq.ft.) so far this year with no large deals in the city centre. Webb said: “There are no new developments on the horizon, although there are plenty of sites, because of a lack of appetite for funding speculative schemes. There is a glut of second hand space in the city centre partly due to the offices Carnival left for its new headquarters.” “The out of town market is faring somewhat better,” said Webb, ”with half a dozen or so active enquiries seeking accommodation of over 2,787 sq.metres (30,000 sq.ft.) mainly wanting space along the M27 between Chandlers Ford/Eastleigh in the west to Portsmouth in the east.”

The enquiries are agent led and should some of them convert by the end of the year, it will probably mean the difference between an average and a bad year in terms of take up.

The South Coast Central Commercial Property Register

The South Coast Central Commercial Property Register for the South Coast is a leading UK business property publication from Martin Austen Publishing. The aim of the publication is to offer a simple and effective means of finding Offices Space, Serviced Offices and Commercial Property along the South Coast of the UK. You can also find the latest commercial property news for the South Coast region.

Bournemouth Office Space Market is Lively

In Bournemouth, judging by recent transactions, the picture is more optimistic, said Bill Parker of Goadsby. “We have seen strong interest in prime office space, exemplified by the 2,369 sq.metres (25,500 sq.ft.) 2 Poole Road which was bought by Troika Developments a year ago and has now been Goadsby has achieved four deals in the property which are either completed or in solicitors’ hands at a quoting rent of £172.16 a sq.metre (£16 a sq.ft.). Parker said: “The success of this deal has persuaded Troika to refurbish the similarly sized Waverley House.” “There is demand for the right product because older offices have become more costly to manage. The problem is that banks are not providing the funds for refurbishment.”

The other positive transaction on the south coast was Southampton City Council paying £25 million for the 6,689 sq.metres (72,000 sq.ft.) One Guildhall Square in Southampton. “With no new construction due to start, there has been speculation that the lack of prime office space will ease downward pressure on rents for Grade A space and high quality Grade B space as the market will be led by a general decreasing supply of quality stock towards the end of 2010,” said Parker. Goadsby has also achieved success at Arcadian Estates’ Capital House with lettings of 2,193 sq.metres (23,600 sq.ft.) and a further tranche under offer. Andrew Hodgkinson of Goadsby said: “It is a real success story for Southampton. Several of the floors have been let to companies who previously did not have a presence in the city, which is an undoubted boost to the local economy.” The quoting rent is £91.46 a sq.metre (£8.50 a sq.ft.).

The South Coast Central Commercial Property Register

The http://www.compropregister.com/southcoastcentral.aspx"> South Coast Commercial Property Register is a leading UK business property publication from Martin Austen Publishing. The aim of the publication is to offer a simple and effective means of finding Offices Space on the South Coast, Serviced Offices on the South Coast and commercial property on the South Coast. You can also find the latest commercial property news for the South Coast region.

Industrial Commercial Property leads the way on the South Coast

Trilogy is now under offer.”The surge in demand points to a growing shortage, but rents have yet to respond although free periods are coming in a little. According to Moyler the rise in activity has prompted SEGRO to start the process on sites it has at Merlin Park, Portsmouth that will lead to a planning application. London Clancy’s David Heda noted that the shortage of large industrial units has been made more acute by the absence of new development. This view was reinforced by Matthew Poplett of King Sturge who said: “There are no buildings of over 4,181 sq.metres (45,000 sq.ft.) available between Portsmouth and Southampton and only a speculative unit at Apex House, Fareham, under construction.

There is also a lack of development sites along the M27 corridor and we expect no new construction for between 12 and 18 months.” Jerry Vigus of Lambert Smith Hampton said: “While it is obviously encouraging to see the increase in demand for large units, if there is no supply for future demand then there could be significant long term consequences for occupiers.” He points the finger for part of this problem to the government’s empty rates policy. “We have a number of developer and institutional clients who are well aware of the shortage but due to funding issues and - more importantly - empty property rates legislation, there is no incentive for them to build speculatively.”

The South Coast Central Commercial Property Register

Commercial Property Confidence Returns Slowly To Scotland

What is happening in Scotland is mirroring the rest of the UK with a recovery in lettings and investment sales but a growing shortage of Grade A offices in the major cities. Although improving, confidence is fragile. Even so, the market is improving and CB Richard Ellis reported “a marked increase (in take up) in the first half year. Glasgow performed well with a doubling of leasing to 28,037 sq.metres (301,800 sq.ft.) compared with the same period of 2009. Aberdeen and Edinburgh also saw “impressive increases.”

Also similar to the other major cities of the UK, the market is dominated by smaller deals and the lack of new development brought a reduction in the amount of space available. The CB Richard Ellis view is that it is set to continue “with few new developments in the pipeline. However, this undersupply may encourage developers to go into construction in the near future.” Rents have held up well and even increased in the oil city of Aberdeen. But overall performance in terms of capital growth and returns to investors declined in the second quarter of the year, although retailing was more resistant to the slow down. Industrial property also displayed some resilience with total returns of 2.8% and capital growth of 0.8% in April-June.

Aileen Knox of CBRE said: “Economic recovery appears to be at a slower pace in Scotland than the rest of the UK and this has affected the commercial property market. However the Bank of Scotland PMI survey points to an improvement in GDP growth in the second quarter of the year.” “This is important for Scotland as there was no growth in the first quarter and it is likely to feel the effects of ongoing austerity measures introduced by the new government due to a large number of public sector jobs.” On the other hand, the investment market is healthy enough (even though a bit down on the rest of the UK) with Property Data reporting transactions of £670 million (led by UK institutions) in January-June compared with £290 million in the same period of 2009.

The Scotland Commercial Property Register

The Scotland Commercial Property Register for Sctoland is a leading UK business property publication from Martin Austen Publishing. The aim of the publication is to offer a simple and effective means of finding Offices Space, Serviced Offices and Commercial Property in Scotland . You can also find the latest commercial property news for Scotland.

Commercial Property Investors like Glasgow

Glasgow has enjoyed a considerable recovery in the pace of the investment market, sharing renewed interest by institutions and private buyers. The latest large deal is the sale by Lloyds Bank and the Paradigm Real Estate Managers of the 55,740 sq.metres (600,000 sq.ft.) Skypark, which has planning permission for a 50% increase in space. There has been a considerable interest in the office facility and the front runner is Moorfield at a price of £55 million, under the asking price of £58.4 million. The property was developed by Kenmore before it collapsed. Another major transaction is the sale of the 2,923 sq.metres (31,462 sq.ft.) Allan House, 21-25 Bothwell Street, Glasgow through Ryden for £6.33 million, a yield of 7.16%. This is a prime location and includes a restaurant on the ground floor. It has been bought by Threadneedle Property Investments from Royal London Property Fund. Also on the market is Scarborough Property Holdings’ 110 St Vincent Street (again, a prime location) for £40.4 million and a yield of 6.1%. The 9,290 sq.metres (100,000 sq.ft.) office block is the Glasgow headquarters of the Bank of Scotland (now part of the Lloyds Banking Group) on a 15 year lease that commenced in 2007.

Edinburgh commercial property rut shows potential 2011 upswing

Edinburgh is going through a slow period with the office market stuck in something of a rut although the tightening supply situation indicates an upswing in 2011. Stewart Taylor of CB Richard Ellis said: “The current phase of slack water which the market is in will prevail for much of this year but this is, in itself, an indicator of changing conditions.” “The most encouraging characteristic of the year to date has been the reappearance of some larger requirements which were almost completely absent throughout 2009. This, coupled with stabilisation within the financial sector and retreating fears over accommodation release, should contribute to the changing tide.” In fact the first half take up of 25,084 sq.metres (270,000 sq.ft.) was reasonable and, according to Ian Lochhead of Drivers Jonas, there is only 55,740 sq.metres (600,000 sq.ft.) available. He noted that “with offices part let it is hard for occupiers to find large spaces so that someone with a 9,290 sq.metres (100,000 sq.ft.) requirement would have a problem finding it.”

At least there is some hope on supply with Edinburgh Council giving the green light to the £85 million expansion of the international conference centre in a design by architects BDP. This will increase the conference space by 9,290 sq.metres (100,000 sq.ft.) and double that amount in speculative offices which are likely to be very welcome when completed in 2013. Kenny Waitt of Jones Lang LaSalle commented: “Nothing else of this stature, quality of site and location is expected to come out of the ground in Edinburgh over the next three years, so it is going to effectively be the market.”

The investment market remains firm and one of the latest deals in the offing is the Swiss investor Afia paying around £20 million (yield 7%) for the 3,948 sq.metres (42,500 sq.ft.) second building in Gladedale’s £450 million development of the former Royal Infirmary site. The building already has a tenant in the law firm Morton Fraser.

Financial Business District Enhances Business Friendly Glasgow

For a number of years Glasgow has proved to be one of the best business locations in the UK which has underpinned a strong office market. The virtues of the city have been displayed again in the first half year with the doubling of take up. This performance is no accident and owes a great deal to the encouragement given to businesses to locate in the city and the readiness of developers, notably at the International Financial Services District (IFSD) to provide the suitable Grade A space.

Figures from Jones Lang LaSalle show that the first half saw large lettings of Grade A offices to blue chip companies which has brought a 14% reduction in availability in the second quarter of the year. JLL’s Mike Buchan said: “It is very positive for Glasgow, as the city continues to perform well in a difficult economic climate. It is very pleasing to see high quality occupiers committing their future to the city and see a large amount of stock absorbed. We expect to see further Grade A lettings throughout the year as there remains a number of unsatisfied requirements.” Audrey Dobson of CB Richard Ellis commented: “Take up during the first six months was polarised with significant activity at the smaller end of the market fuelled by new start ups.

Occupier demand was also healthy at the larger end, particularly among the professional sector.” There is no doubt about the boost to confidence and the widespread view among property professionals that the performance in the first half has long term implications. David Smith of Lambert Smith Hampton said: “The level of uptake of Grade A offices, coupled with the impending lack of new supply and the continuing high interest from investors in acquiring these properties are all a strong signal to banks and fund managers who will, hopefully, now loosen the purse strings to finance the next wave of new development that will help Glasgow maintain its position as one of the UK’s most successful inward investment locations.”