Market recovery makes commercial sense
“Although it is too early to suggest that the commercial property market is completely out of the woods, it is quite apparent that the improvement in confidence is leading to an increase in enquiries for business spaces and generating new activity and momentum.
“At Fenn Wright, we have seen a marked increase in enquiries for warehouse and industrial premises, since the beginning of November. This is probably fuelled by a number of factors such as an increase in imports to serve online shopping businesses, plus the expansion of local and regional manufacturing and construction businesses.
“Our Ipswich office completed the sale or letting of about 136,000 sq ft of property in the last quarter of 2013, and that level of demand is being sustained. Healthy competition for premises is leading to a shortage of good quality units across most size ranges and this is now beginning to put pressure on rents and capital values. There are a number of new requirements in the Ipswich area for units of between 20,000 and 50,000 sq.ft. and the lack of available stock is likely to result in these only being satisfied by new, purpose-built facilities. So, occupiers will have to make do with short-term, secondary space in the interim.
“Turning to the office sector, in previous years we have seen a number of tenants come into the market when their lease is due to expire. Typically, tenants saw this event as an opportunity to consider relocation to better quality accommodation, and then were quite often induced to stay put by their landlord offering to renew their tenancy with substantial incentives, discounted rents and flexible lease terms. However, market conditions appear to be changing. A number of local businesses are now under increasing pressure to relocate in order to expand. And this is a challenge in a sector that is suffering from the lack of Grade A space. Occupiers are having to wait for accommodation to be refurbished, adding to the length of time it is taking to satisfy requirements. A recent example is Churchill House in Crown Street, Ipswich. This 16,000 sq.ft. building which Fenn Wright recently acquired on behalf of Scrutton Bland Accountants & Financial Advisers will now be subject to comprehensive refurbishment before the firm move in, later in the year. If occupier demand continues to outstrip supply, rents will inevitably increase. However, values still have some way to go before being sufficient to make new, speculative office development viable.
“The town centre retail market remains challenging. The burden of what is seen as excessive business rates continues to prove to be a significant barrier for many potential occupiers. Although those landlords who are able to offer discounted rents and flexible lease terms are having some success in filling empty units. Demand within the convenience food store, out of town discount store, and premium sectors continue to be strongest.
“Finally, it is quite noticeable that the increase in competition in a number of sectors has resulted in a renewed sense of urgency in terms of concluding transactions. This is definitely a most welcome development in a market where, over the last few years, deals have taken far too long to get over the finish line. Long may this particular trend continue (please)!”
Fenn Wright can offer full technical support throughout the property acquisition process. For more information or to arrange an obligation-free meeting then please contact the Commercial team in Ipswich, Colchester, Witham or Chelmsford.