Regeneration continues apace in Derby with plans or a further £1 billion of investment following the completion of Jurys Inn, Quad, and Westfield to name but a few. The Council are seeking to improve the leisure offering with proposals for a Velodrome and Olympic sized swimming pool, whilst firmly backing further regeneration following the announcement of a £10m fund to provide capital injection into the existing pipeline of new projects. 

The new bus station has recently opened forming part of the first phase of the Riverlights scheme, greatly improving the public realm in this area of the City, whilst the opening of the two new hotels and casino are scheduled for the final quarter of this year. 

On the retail front Westfield Derby are anticipating 5 new openings within the next few months including; Duck & Cover who will be opening their second UK retail store after the recent opening of their flagship store in Birmingham, testament to Derby’s recent rise in the CACI national retail rankings.

The letting of 31,000ft² at Cardinal Square to NHS Derby City by Nurton Developments is the largest office letting in the City for more than a decade. It is not only second hand space that is moving, as construction work is well under way for a 12,500ft² HQ for Porterbrook by Cedar House Investments.

Land releases for redevelopment include the 21 acre former College site for mixed use development to the west Derby suburbs with a  further 18 acre site adjacent to the City Centre is anticipated to be available in 2011 will undoubtedly attract significant interest.

Recent industrial deals include the sale of 60,000ft² to HW Martin at Somercotes and 30,000ft² of lettings at Langham Park’s Berristow Lane scheme at J28 M1.

Derby is well placed and with a proven track record to deliver, the challenge is to ensure that the next £1bn is as successfully delivered.

It has been a mixed 12 months since the last Derby Retail Study, the UK has exited recession and the Office of National Statistics has reported positive sales growth for both February and March, which continued through Easter.

However the outlook for 2010 remains cautious, with further high profile administrations of Birthdays, Borders, ENVY, Diamonds and Pearls, and Adams, the latter two of which went into administration for the second time in a year. On balance it is not all doom and gloom. Deloitte report a significant decrease in administrations towards the end of 2009 with a Q4 like for like decrease of 58%.

Several retailers have also posted positive results with the John Lewis Partnership posting pre tax profits up 9.7% and Next reported an increase in profits, up 18%.

The overall vacancy rate has dropped to 11.97% , a reduction of 1.68%, with the shopping centres and Cathedral Quarter both performing well, which has helped to reduce the rate from our Spring 2009 report.

Alan Pearson of FHP commented:

 "it has been a positive start to 2010 with enquires up on a like for like basis and a reduction in Derby’s vacancy rate which is below the Midlands average of 15% at 11.97%. Derby now shares some parity with Nottingham which has a vacancy rate of 11.98%, which increased by 2.76%. There are a number of new entrants to the city currently under offer and providing these complete this will provide a welcome boost to the retail offer and hopefully build on the current CACI ranking for Derby of 31, which has risen from 63 prior to the opening of Westfield Derby, placing it firmly on the retail map."

Click the link below to view the Derby Retail Study Report.

It has been a tumultuous twelve months since our last Retail Study and whilst positive retail sales have been reported, the outlook for 2010 remains cautious. 

However, it is not all doom and gloom.  Since the CVA, JJB subsequently obtained an investment injection of £100 million and are currently on the acquisition trail once again.  Additionally, the majority of Birthdays stores were immediately bought out of administration by the former parent company (Clinton Cards) who in turn made a reported £13.5 million profit from the deal.  Furthermore, twelve months on from the collapse of Woolworths, 75% of their former stores have now been acquired by other retailers.

Several retailers have also posted positive results this month.  M&S and Next have surpassed sales expectations for Q3.  JD Sports have reported a pre-tax profit increase of 14.5% and John Lewis have just broken their weekly sales record.

It has been another testing 6 months for the retail market as the uncertain and challenging economic times continue.

Several more retailers have fallen victim of the economic downturn since our last report. The most publicised of which being Woolworths with others including; Zavvi, USC, Adams Children’s Wear and Olan Mills. As a result, it is not surprising that vacancy rates across the country have increased over the past 6 months. However, the much feared total market meltdown does not appear to have materialised and a cautiously optimistic view of the market does appear to be materialising.

The results of our latest study show that vacancy rates across the city are up on the last study, with an overall availability rate for Derby City Centre of: 13.65 % (93 Shops) which represents an increase of 2.27 % on the last study.  The trend emerging in our Autumn study continues with the High Street remaining the hardest hit with an availability rate of 14.82 %. In analysing the High Street availability it is however interesting to note that the availability within the Cathedral Quarter High Streets is less than the overall average at 13.17 %. The overall winners are the shopping centres with an average availability of 11.11 %, reaffirming the strong position hopping centre landlords find themselves in with the power to entice tenants with flexible deals and strong incentives.

Please click below to see a full copy of the Fisher Hargreaves Proctor Report.

Whilst the talk is all of the credit crunch and a general tightening in the market, I am glad to be able to report that the industrial team at FHP have disposed of nearly 600,000 ft² of industrial space in the first quarter of 2008.  This is an excellent start to the year and shows the resilience of the industrial property market in and around Nottingham.

Our developer clients have continued to build on a speculative basis and we continue to see take up on Wilson Bowden Developments at East Midlands Distribution Centre, near East Midlands Airport,   Blenheim Park, off J26 of the M1 and at Gateway 28, near J28 of the M1.  Rents have continued to rise with rents of around £5.75 per ft² regularly being achieved in and around Nottingham albeit a little less than this in the northern part of the county.

Notable lettings have included former TGG warehouse off the A52 at Grantham of 334,000 ft² which has been let to Grantham Books who are a subsidiary of the Random House Group.   Also at J28, Richard Walker and Chek Whyte’s, 109,000 ft² warehouse has been let to Door Stop International which is a subsidiary of Synseal Holdings Limited.

The development of the Castlewood Business Park by Wilson Bowden Developments next to J28 of the M1 is now well under way and the steel frame work for the first phase is now fully erected which comprises units of 40,000 ft² and 30,000 ft² which can be split and they are already securing significant interest.

It will be interesting to see how the advent of business rates being payable on vacant industrial property affects the market for speculatively developed units and it is likely that the developers may well become more cautious in what many perceive to be a more mixed economic outlook which may well cause there to be less development which may lead to increases in rental levels and capital values for new property.  Also it is likely that industrial sites which are approaching being ready for redevelopment will be demolished much sooner and thereby reducing the stock of more economical space as well. 

The industrial property market in Nottingham and surrounding areas continues to prosper following what was for FHP in 2006 a record year.  Last year we acted in transactions on industrial property which totalled over 2.1 million ft² which easily surpassed the previous year of 1.25 million ft². 

The intense activity in the market last year is obviously partly a reflection of the demand for industrial space but also reflects the fact that developers have been speculatively developing large amounts of space in response to this demand. 

Over the last few years there has been little stock available of industrial buildings and this has led clients of this Practice to carry out a significant amount of speculative development in such locations as Willow Farm Business Park and Langham Park at Castle Donington, Gateway 28 and Park Lane Business Park at Sutton in Ashfield, Doncaster South at Harworth and the Newark Business Park.  As a result over 600,000 ft² of the total space transacted last year  was new build accommodation all bar 80,000 ft² of which was speculatively developed. 

The previous lack of availability of space coupled with increasing land costs and building costs has seen values soar over recent years which has seen rental values rise to £5.75 – £6 per ft² per annum and capital values of up to £80 per ft². 

Notable deals include the sale on behalf of Claremont Property Holdings Limited of Doncaster South to Rreef Limited, a subsidiary of Deutsch Bank.  This brand new high bay warehouse in the north of Nottinghamshire is the largest ever speculatively developed building in the county and reflects the burgeoning market for high bay warehousing in the A1 as well as the M1 corridors. 

The first quarter of 2007 has seen no slackening in the market although the recent interest rises will probably lead to the capital values for smaller freehold buildings stabilising after a number of years of good growth. 

One of the interesting trends over recent years, which we are encouraging our clients to capitalise upon, is the spread of the high bay warehousing market, which has been driven in the main, by the strong retail market over the last decade.  We are currently marketing a number of opportunities which include existing buildings at Grantham 334 (334,000 ft²), the Nucleus at Nottingham (130,000 ft²), Sutton in Ashfield (95,000 ft²) and sites where proposals are well advanced for speculative development at Gateway 28, Sutton in Ashfield (300,000 ft²), East Midlands Distribution Centre, Castle Donington (270,000 ft²) and The Core, Chesterfield (170,000 ft²). 

We are also acting on sites where we would be happy to satisfy any large warehousing requirements on a design and build basis at East Midlands Distribution Centre (up to 1 million ft²), Harworth near Doncaster (up to 500,000 ft²) and Castlewood on Junction 28 of the M1 (up to 500,000 ft²). 

Whilst this market has undoubtedly been driven by the retailers it should be noted that over three quarters of all new space taken in these high bay warehouses are replacing older buildings which are typically smaller with lower eaves heights and as such it looks like this market may well run for some time. 

During the third quarter of 2006 the UK continued to experience robust economic growth with Gross Domestic Product (GDP) increasing by 0.7%, which is a slight decrease on the previous quarter. On an annualised basis the rate of growth now stands at 2.8%. The continued growth is largely being driven by the business services sector, which is beginning to benefit from the strength of the global economy and as a result saw growth of 1.4% over the quarter. The Manufacturing sector experienced a slight downturn in output during the last month of the quarter but still experienced overall growth of 0.6% during the quarter. Despite a recovery in consumer sales during the summer month’s retail sales have been modest during the past quarter with the volume of sales increasing by 0.6%, which is a slight decrease on the preceding quarter.

The current Inflation rate stands at 3%, which is a full 100 base points above the Bank of England’s target rate of 2%. As a comparison the rate of inflation the previous quarter stood at 2.4%. Inflationary pressures continue to come from energy price rises which again climbed during the quarter, and other household costs such as DIY materials and rents. Price reductions for the cost of DVD’s, CD’s, digital cameras and petrol were also not as large as the same period last year, which also fuelled the rate. Interest rates have increased to 5.25% from 4.75% since our last report. The Bank of England cited firm economic growth, a positive global outlook and the continued rise in asset prices among its reasons. Many analysts have also speculated that a further increase in interest rates may be needed if inflation continues to increase.

The property investment market has lost little momentum over the past quarter and has continued to deliver the strongest returns in the investment market. According to the IPD total year on year returns are 20.6% outperforming equities with returns of 14.7% and gilts returning 2.5%. Quarterly returns see all property returning 3.8%, equities 3.6%, and gilts 2.4%.

The office sector has continued to be the best performing property sector with total returns for the calendar year to the end of September of 24.4%. The industrial sector remains the next best performing asset with total returns of 19.6%, whilst the retail sector remains in third place with total returns of 19%.

All property sectors have experienced rental growth in the year up to September and once again the Office sector has been the best performing seeing a growth of 4.6% in the year to September. This sector is benefiting from the continued growth within the financial and business services sectors, also meaning that take up levels have increased and vacancy rates are continuing to decline.

Retail rental values have increased by 3.3% in the year, which is a decrease of 0.5% for the same period in 2005. Poor sales continue to dominate the retail market, and with the growth in online purchases continuing and diverting sales away from the high street, conditions for retailers are likely to remain tough.

A slight upturn in rental growth in the industrial sector has been experienced for the year up to September with 1.3% growth being achieved. This is partly being driven by a recovery in the manufacturing sector, which is benefiting from the strong economy and an improvement in exports.

During the past quarter the pace of investment yield hardening has slowed down across all sectors and the all property equivalent yield now stands at 5.5% for the year up to September. For the retail sector this stands at 5.1%, the office sector stands at 5.6%, and for the industrial sector it stands at 6.3%.

We are now seeing investors relying more on rental growth rather than capital growth to drive returns. This is putting the office market at the forefront of investor’s minds with more focus being placed on the actual income producing potential of the property. Demand for prime investments remains strong but there has been a slight weakening in prices for secondary location property.

Figures for the quarter for the UK housing market show that house prices rose once again albeit at a slightly lesser rate than before, however the annual price inflation rate rose from 8% to 8.6%. The strongest price rises are still within the South of England and in particular London. The average house price in the UK now stands at £184,924 which is 0.78% increase on the previous quarter.

House prices in the East Midlands have also seen increases with the average price now standing at £163,075, which is a quarterly change of 4.4% and an annual change of 4.8%. The City of Nottingham has particularly done well over the past quarter with a 6.4% increase in prices.

Up to the end of November the FHP Office and Industrial team completed transaction with a total capital value circa £135.67 million, which is year on year increase of 17%. During November itself deals were completed with a capital value of £42.3 million. This is an approximate increase of 330% on the corresponding month during 2005. Enquiries were 10% down year on year, whilst viewings remained at a similar level.

Over the same period the FHP Retail & Leisure team have completed transactions with a capital value circa £52.15 million. This is 6% less than the same year on year period for 2005. Enquiries are also slightly down (7%) as are viewings (10%).

For the first time in three decades the three principal East Midlands Cities of Nottingham, Derby and Leicester are witnessing strong demand for new City Centre sites for large scale speculative development from developers says Michael Donaghy of Fisher Hargreaves Proctor.

In Nottingham occupier demand has been strong for Grade A City Centre space only 11,000ft² remains in Royal London’s 50,000ft² Chapel Quarter Scheme on Maid Marian Way current occupiers being Reuters and Trent FM.  Coming very soon is the Axis, a Henry Boot development with over 40,000ft² of offices within a truly mixed use scheme also incorporating retail, leisure and residential.  November will see the completion of McAleer and Rushe’s Waterfront House delivering approximately 74,000ft² of Grade A space again within a mixed use scheme.  Both developments have been received well with serious discussions over large portions ongoing.  Whilst the Peoples College site on Maid Marian Way and the East Side scheme are both coming forward there is still real demand for other opportunities.

In Derby, Cedar House Investments, Ivy Grove and Prime Holdings are on the last phase of development of Pride Park and the adjacent Wyvern Park, both of which continue to be a success story principally due to their proximity to the City Centre and their ability to absorb that demand.  PDF have recently acquired 12,000ft² and Omya approximately 10,000ft² on the Wyvern.  Rental levels are hitting £14.50 per ft².  The near completion of this scheme has led the likes of Wilson Bowden to actively search for City Centre sites, albeit to implement future City developments these rental levels will most likely have to increase.

In Leicester Akeler Developments are constructing a 50,000ft² of City Centre offices within Phase 1 of Colton Square which will be reading in May 2007.  Initial interest has been good with quoting rentals believed to be £16.50 per ft².

The out of town business parks have faired comparatively less favourably with Miller Birches NG2 in Nottingham and Pride Park in Derby the exception to this rule principally due to their fringe of City status and comparatively higher parking levels when compared with City Centre stock.  NG2 has achieved over £17.50 per ft² for large floor plates within the Arc and the 30,000ft² HBOS deal and over £20 per ft² for small to medium sized self-contained entities within its Triangle Scheme.

Due to the continued high levels of demand from the owner occupier sector and the obvious time lag taken by developers to meet with this demand 2006 can be viewed as the year of the small freehold.  Small courtyard schemes very often offering between 1,500ft² – 3,000ft² of self-contained offices are either on the market or soon to come to the market in Nottingham at the Triangle on NG2, Ash Tree Court on Nottingham Business Park, in Derby on Brunel Business Park and Pride Point, Pride Park and Leicester on Forest Park to mention only a few.

With the three core Cities having somewhat limited or none at all in the case of Derby Grade A City Centre office space, demand is indeed strong from developers to bring appropriate City Centre sites forward. 

Speculative development along both the M1 and A1 corridors has been a feature of the past 12 months and the developers who have had the foresight to bring steel work out of the ground have in most instances been rewarded. 

The M1 corridor in Nottinghamshire stretches between Junctions 25 and 28 of the M1 with the principal ongoing speculative development programme ongoing at Junctions 26 and 28. 

At Junction 26 of the M1 Wilson Bowden Developments have opened up Blenheim Park, a 30 acre 600,000 ft² scheme where they have pre-let 80,000 to Healthstores (Wholesale) at £5.25 per ft² and have built 54,500 ft² in 10 units ranging in size between 4,500 and 7,600 ft² – of these 6 have been sold or let prior to completion. 

Alongside they are also developing a unit of some 34,500 ft² which is nearing completion with detailed negotiations ongoing to take 50% of the space. 

As a consequence the developers are now planning their next phase for which detailed planning application is shortly to be submitted. 

Access 26 is some 4 miles west of Junction 26 accessed from the A610.  Here Miller Birch have speculatively developed a 260,000 ft² unit which has been forward funded by managed funds of Standard Life with the unit being offered at an asking rent of £4.85 per ft². 

At Junction 28 Wilson Bowden Developments, TFD Midlands and Sladen Estates have all recently completed speculative schemes providing units of between 25,000 and 110,000 ft² in size. 

Both Wilson Bowden and TFD Midlands have their units which range between 30,000 and 110,000 ft² under offer with Sladen also having success at The Nursery and finally selling its final unit at Station Park. 

As a consequence Wilson Bowden Developments have now purchased a further 17 acres for their next phase of Gateway 28 with the more strategic developments at Castlewood (150 acres) and Hamilton Park (80 acres) moving forward quickly. 

On the A1 Walker Developments have recently confirmed the sale of their 305,000 ft² unit at Harworth to managed funds of Rreef and are now looking to implement their 2^nd phase which is likely to be a further speculative unit of a similar size. 

This sale continues the emergence of the A1 as a recognised distribution location and we all await confirmation from both Gladman and Gazeley as to the speculative programme that they are to implement on their 2 sites at Beavercotes and Newark respectively.

In undertaking this whistle-stop tour around the county one can undoubtedly conclude that it has been a record year for speculative development within the county with a far greater cross spread of developers now committed to this sector.