Commercial values moving up?
The commercial property market follows a cyclical pattern, and historically the trend both into and out of a recession is for the commercial market to ‘lag’ 9 – 12 months behind the housing market.
Throughout the last 6 months of 2015 our commercial property teams in Ipswich, Colchester and Chelmsford report strong occupier demand and upward pressure on values in most sectors. Of the bulk classes, offices, industrial and retail, the industrial market has shown the strongest recovery.
A summary of current trends includes:-
– Rental and capital values increasing.
– Landlords re-engaging with rent review process and serving notices to increase rents.
– Letting incentives much reduced; maximum 3-6 months rent free in exchange for 10 year term certain.
– Tenant break options not being initiated.
– Overall shortage of stock.
– Secondary town centre office stock has been much reduced as a significant number of such office buildings move into residential use under Permitted Development (PD) Legislation.
– Two tier marketing becoming increasingly polarised with premium rents paid for out of town opportunities, particularly those with generous parking provisions.
– We forecast stable ‘in town’ office rents and potential for rent increases for for best out of town stock particularly in the 1,000-5,000 sq ft bracket.
– Prime retail areas and occupancy have stabilized significantly over the last three quarters. The secondary market has been slower to respond but is now improving.
– Prime rents remain beneath 2007 peak figures, secondary rents have stabilized but in some cases at only 60% of peak 2007 levels.
– Demand improved in secondary market and many long term voids now occupied following downward rent adjustments.
– Internet retailing continues to challenge the High Street and of the bulk classes we forecast retail will recover more slowly than other sectors.
In summary prospects in 2016 look positive for landlords and developers; tenants would be wise to budget for the possibility of increased occupational costs.
For a more detailed consideration of your particular requirements or to discuss values please contact: