AUTUMN OUTLOOK FOR THE OFFICE AND INDUSTRIAL MARKET

Industrial/Warehouse News

Tim Gilbertson, a Director at Nottingham property consultancy FHP, reviews the prospects for the office and industrial property market.

False dawn is an over-used phrase.  But there have been so many of them since the financial crisis pole-axed our economy that it’s no surprise. Since 2010, we seem to have gone through cycles in the commercial property market where promising signs early in the year have been replaced by uncertainty and disappointment.

This year, though, could be different.  Sure enough, 2013 started off on a positive note with a rise in the numbers of people enquiring about moving their businesses into new property and then the market went to sleep again.

But once we got past what seemed like an interminably long Easter, the numbers of people looking to do deals for office and industrial property has slowly but surely increased.  Not only have there been more enquiries, but those enquiries are more serious and they have translated into more deals.

In the wake of all those false dawns, it’s a brave surveyor who calls recovery.  The evidence of economic progress is all around us though.  We’ve seen the GDP figures for the whole of the UK steadily improving and at grassroots level the surveys from the local Chamber of Commerce suggest that sales, profits and order books for businesses in Nottinghamshire and Derbyshire have been getting stronger for months.  Even Forest are riding high in the Championship!

On that basis, we shouldn’t be surprised to see those businesses who put expansion plans on ice in the downturn deciding to dust them off and see what’s out there.  In the market for small to medium-sized industrial property, I and my colleagues at FHP have been handling a steady stream of activity, and there have been some real successes at prominent sites in and around the M1 corridor – notably at Castlewood, near Junction 28 of the M1, and down at Castle Donington.

With no new stock around, good quality second hand buildings are being snapped up quickly when they become vacant.  That tells you the appetite is out there. In fact, demand is running ahead of supply to the point where businesses are snapping up older premises rather than waiting for something new and perfect to come along.

This hints at the reasons why it might still be a while before the market recovers its equilibrium properly.  Nothing new was built during the downturn and to this day the losses banks suffered on property mean you have to make an extremely strong case to fund development and satisfy investors that there will be a return – especially when occupiers will no longer sign very long leases which give building owners security.  So while the evidence of recovery is gathering, the risks of building speculatively and hoping an occupier will appear mean caution is still the watchword.

Where does this leave us?  Well, we haven’t got people beating our door down every week asking if we’ve got a spare 100,000 sq ft on our books, but the building Asda took for a home delivery operation at Bulwell could have been let three times over – so serious demand is out there.  As the increasing evidence of recovery demonstrates, so is the pressure to try to find property solutions for businesses who want to make the most of growth.  One of those solutions may be design-and-build, where a deal is done to develop a new, purpose-built property.  Not only does this mean planning ahead, it means having a sound financial package and the security of a long lease to support it.

Interestingly, it isn’t just distribution warehouses driving demand alongside the M1 corridor.  Much of the interest in the larger properties that are available in Nottinghamshire has come from manufacturing businesses, which is a positive sign for jobs.

We have seen the back of false dawns now.  The next most over-used phrase?  It’s time to stick a spade in the ground!