Mike Oldrieve MRICS, of Vickery Holman, comments: Strong performance in a relatively stable market summarises the first half of 2017 but how long before the politicians put an end to all that? Whilst there is currently no signs of overheating 2017 could well be the year we point to as the top of the market.
Moderate growth are the words that appear regularly in the Bank of England’s latest report with Businesses services, manufacturing and construction all showing moderate growth. The most noticeable statistic is consumer goods price inflation which rose markedly as higher cost filtered through. The housing market remained flat whilst employment remains an issue with a continued lack of skilled staff.
Nationally, the RICS indicate in their latest UK Commercial Property Market Survey that headline rental and capital growth is accelerating with industrial sector continuing to lead the way and London retail/office markets contracting slightly. Lack of supply continues to dominate and push prices higher. This is reflected by the IPD UK quarterly property index which indicates that all property “increased by 2.1% in the first quarter of 2017 which was annualised equates to an increase of 3.5%”.
The South West like the rest of the UK continues to perform strongly but an educated market seems to be resisting overinflated prices which is keeping a lid on prices and providing a relatively stable market. There continues to be a lack of supply which is forcing larger investors from the South East to look further afield including the South West and also to consider smaller lot sizes.
Most noticeable transaction of 2017 in the South West so far is the sale of the Wyndeham Print works in Roche Cornwall by Vickery Holman. Probably the largest complex in Cornwall at 250,000 sq. ft. the entire property is let to Wyndeham Roche Ltd until 2021 paying £500,000 per annum. The sale achieved £4.2m, a net initial return of 11.2%. Multi let estates continue to attract a large following with net initial yields as low as 7-8%. The main issue is they do not come up that often. There are a number of landlords who would sell but what do they do with the cash if they do?
A noticeable lack of new development opportunities although there are one or two pre lets now under consideration and attracting interest at the 6.25 – 6.5% net initial level. Refurbishment of existing buildings remains an interesting option providing flexible, moderately priced accommodation for a reduced but still active South West market. A prime example of this is St Andrews Court Plymouth which is in the throes of being refurbished by Vickery Holman’s clients.
A steady flow of high street opportunities is maintaining prime yields at round the 6% net initial. New opportunities do exist such as the Retail Park in Bodmin with B&M, Farm Foods and KFC being marketed by Vickery Holman with an asking price of £7.3m which reflects a 6.25% net initial return. Vickery Holman have also recently sold the Co-op supermarket in Penzance for £1.738m reflecting a net initial yield of 6.5%. The pub and restaurant sector is probably the most active with new schemes such as the food quarter in Exeter’s Guildhall centre which opened in the autumn with similar schemes providing a number of opportunities for investors throughout the South West.