CBRE hosted its annual property market insight briefing on regional city performance at the Ageas Bowl, Southampton, on Tuesday 14th July to over 100 local occupiers and investors. Presentations on the latest political and economic backdrop were given by CBRE’s Head of UK Research, Miles Gibson and Research Director, Andrew Marston.
Overall demand has now begun to firmly respond to the strengthening economic position in the South Central Region. Southampton itself saw take-up reach 64,242 sq ft, almost double the amount in the first half of last year. Demand from occupiers continues focus on better quality space, with Grade A deals forming the lion’s share of take-up so far. Whilst demand has improved in the city centre, out-of-town markets are more active.
Across the M27 corridor as a whole, there has been approximately 200,000 sq ft of take-up in the first half of the year against 179,000 sq ft in the corresponding period in 2014 and a marked improvement on the second half of last year.
Professional services and the public sector have dominated activity in Southampton. In the former group, deals to PwC at Oceana House and law firm BLM at Charlotte Place contributed to a market share of over one-third of all transactions. Meanwhile, Southampton University’s acquisition of 23,190 sq. ft. at 1 Guildhall Square and a deal to the British Transport Police deal at Grenville House led to a market share from the public sector of almost 50%.
Looking at the economic performance for the UK as a whole and the South more specifically, Andrew Marston gave an update and overview of the big picture trends across the country, particularly office and industrial markets both within and outside of London, with an emphasis on regional performance. He also outlined CBRE’s headline forecasts for rental growth and investment in Southampton which is seen as one of key property hotspots for 2015 and beyond.
Miles Gibson focused his comments on the new Government’s manifesto pledges looking at the impact the forthcoming referendum on EU membership, Cities devolution and more specifically the proposed Housing/Planning Bill will have.
Following last week’s Budget announcement, which from a property industry perspective was delivered in two halves; the first delivering a blow to housing associations as they will be required to reduce tenants’ rent by 1% per annum for the next fours, possibly reducing their ability to delivery great housing numbers. The second element being announced on Friday which will, amongst other things, see automatic planning permission granted on ‘suitable’ brownfield sites under a new ‘zonal system’ and ministers having power to seize disused land.
Commenting on the event James Brounger CBRE’s Managing Director for the South Central region said: “Attendance at our event is increasing year on year. One of the key themes still affecting the region is the continued squeeze in office supply, driven by a stronger economy, improving occupier confidence and escalating permitted development to residential, where Southampton has become something of a hotspot.
“From an investment perspective, the region is benefitting from investors looking beyond the confines of the M25 and Thames Valley markets as they seek opportunities in Portsmouth, Southampton and Bournemouth. As a result prime office yields have now begun to respond to the weight of money targeting the region. While in the short term, yields have remained stable at around 6.5%, with deals due to complete into the second half of 2015, it is expected that yields will fall further and begin to converge with those being achieved elsewhere in the UK’s regional markets.”
Southampton City Council’s masterplan for the city has seen further advancement in 2015 with the latest plans for the redevelopment of Royal Pier Waterfront on show to the public this week.
The redevelopment will include over 700 apartments; a major new 47,000m2 office development; retails outlets, waterside restaurants, cafes and bars plus a Epicurean Market. A 250-bed, 4-5 star signature hotel and spa and a large casino with leisure and entertainment facilities (subject to licencing decisions) are also planned along as are a civic, cultural/arts and technology hub and car parking for 2,000 vehicles.
