2015 Preview of the Commercial Property Market in the M3/M27 Corridors

2015 will be a year of continuing momentum in the M3/M27 property markets, building on the strong investments into our region over the last twelve months and taking advantage of the overall positive economic background, writes Mark A Clancy FRICS, Director, London Clancy:

Market activity in values will show a steady improvement, particularly with regards to Grade A space, as occupiers and investors chase down the dwindling stock levels of good quality accommodation.

There will also be a knock-on effect within the secondary market with upward pressure on rents and reducing incentives as the available stock decreases. At the same time, overseas and institutional investors will increase their activity within our region, seeking improved returns and following such substantial deals in 2014 as the sale of Chineham Business Park, Intec and the 500,000 sq ft West Ham Industrial Estate in Basingstoke; the 15 acre Endeavour Park and Brunswick Gate in Southampton and TIAA Hendersons’ commitment to the £165M Silver Hill Shopping Centre in Winchester.

Occupier demand will continue to increase more as a factor of business growth rather than consolidation and lease opportunity and as illustrated last year by Home Bargains, Ocado and Lidl starting new distribution centres at Solstice Park, Andover and Southampton respectively, taking 30,000 sq ft of additional offices at Farnborough Aerospace Centre and Network Rail developing their new 146,000 sq ft operating centre in Basingstoke.

However, there are potential headwinds as well, with the outcome of the Election uncertain and likely to slow the market during the run up. Also, rising construction costs will hinder much needed speculative development. Rates and Empty Rates will remain a major burden for many businesses with no prospect of market realignment until 2017 and also the recently announced no back-dating of successful appeals made after 1 st April this year.

In 2015 we once again expect a strong performance from the industrial and warehouse property sector within our region, with the shortage of stock pushing Grade A rents to £10 per sq ft within the upper M3 Corridor and £8.50 per sq ft in Southampton.

The office market will become tighter given the lack of new build and as more offices are converted to residential through Permitted Development rights. This could at last place some pressure on rents and move the current Grade A levels forward from £17 – £20 per sq ft.

2015 may be turbulent for the major supermarket retailers, but the high street and secondary locations across our region appear to be set to continue their recent improvement, with take up and confidence increasing in most centres.

2015 will be a good year for commercial property in our region, with both occupiers and investors drawing confidence from the benign economic conditions and the undoubted advantages of doing business in the vibrant M3/M27 Corridors.

2015 will also mark London Clancy’s 25 th Anniversary – a momentous year lies ahead!