Investment in Kent and Medway is likely to increase over the next five years, according to a poll taken at the launch of the Kent Property Market Report 2018.
Conducted at an event at the Leas Cliff Hall, Folkestone, respondents from an audience of more than 250 property and development professionals showed 69% believed relative investment in the county would increase over the next five years, with 20% believing it will stay at current levels, and 11% believing it will reduce.
On the question of Brexit and the impact of the UK ending up outside the Single Market and Customs Union, 32% felt it would a neutral effect, 24% negative, 24% quite negative and 10% positive.
However, 77% felt businesses were not prepared for that outcome, with just 7% saying they were.
Produced by Caxtons Chartered Surveyors, Kent County Council and Locate in Kent, this year’s Kent Property Market Report reveals that commercial property activity is increasingly being driven by the needs of micro and small businesses rather than larger corporations, mirroring the market in London and the wider south east.
It also finds that the number of companies from outside the county seeking space here is growing.
The report concludes that while the county’s property market echoes the weaknesses seen nationally and caused by economic uncertainty and global trade wars, there are many positive stories to be told.
One of these success stories is on the county’s high streets where the report states that regeneration projects, active management strategies, and increased housing in town centres have added to their vitality, which is reflected in a fall in vacancy rates contrary to the national trend.
This is despite the clear challenges facing the retail sector which has seen big name failures. In Kent, the resultant fall in prime rents has aided a structural change on the high street, promoting a greater mix of occupiers such as independent retailers, small format gyms, escape room venues and coffee shops.
However, towns at the upper end of the rental scale are still struggling as affordability dampens the market.
The report also finds that the changing face of retail has had a positive impact on the industrial sector with strong demand for distribution space, typified by Amazon’s 34,000m2 last mile sorting centre due to open in Medway later this year and Ocado’s plans for a 1.92ha site at Littlebrook.
Coupled with a good performance in the wider market, this activity has pushed rents up by 24% over the past five years, increasing the appetite for speculative development.
Although conversion of offices to residential use has made space harder to come by, the office sector in Kent and Medway is generally positive for occupiers and investors.
The county’s offices are cost effective compared with the wider South East and so are attractive to companies that are cost sensitive.
Rental growth has been contained at 2% over the 12 months to the end of Q1 in 2018. Average prime rents stand 13% ahead of the pre-financial crisis peak and the sector has seen 28.4% average prime rental growth over the last five years.
On Kent’s business parks, affordability pressures experienced across the south east have seen a small fall in rents leading to a notable increase in take-up from SMEs and newcomers to the county, although average prime rents are 5.4% ahead of the market peak in 2010.
The report says a key factor in attracting new businesses is the availability of high quality skilled labour, with the residential market having a key role to play in that.
In 2017/18, 7,800 new homes were completed in the county, up 7.3% on 2016/17 and just 4.6% down on the pre-financial crisis peak, and with a sharp upturn in the number of units with planning consent or in the planning pipeline.
Expansion in the housing stock is helping restrain prices, which rose overall by 3% with more affordable areas such as Thanet (7.4%), Dover (5.2%), Canterbury (4.7%) and Swale (4.7%) seeing the highest uplifts. Only Gravesham saw a fall in prices, down by 0.4%.
Ron Roser, Chairman of Caxtons, said: “What really comes through in this year’s report is just how commercial property activity is being driven by the needs of micro and small businesses rather than large corporations. It’s also good to see more space being occupied by companies moving into the area.
“In many areas of the county, the increasing involvement of local authorities in both commercial and residential property development is helping to make a real difference, especially where there is less appetite from the private sector.
“With developers, planners and local authorities working together, much is being achieved. This can be seen out on the ground where infrastructure, housing, regeneration and commercial developments are all coming forward.”
KCC Cabinet Member for Economic Development Mark Dance said: “This year’s report looks at how Kent has fared throughout 2017-18. It covers the major initiatives and projects that have come to fruition over the last year as well as looking at the challenges ahead.
“Whilst the economy has been relatively resilient over the last 12 months – despite Brexit and potential trade wars – the report shows us there are wide variations in the performance of individual sectors of the economy.
“Kent remains, and increasingly, is the business location of choice with strong letting figures in the town centre office market.
“I’m in no doubt that times are getting tougher, however, particularly in the retail sector, but town centres are changing and Kent has seen a fall in vacancy rates contrary to the national trend.
“I believe Kent remains resilient with a business environment seen as favourable to investment with major initiatives and projects to support growth and economic development in our county in the coming year.”
Gavin Cleary, CEO Locate In Kent, said: “The 2018 Kent Property Market Report mirrors what we are seeing on the ground with businesses and people attracted to Kent because of its affordability, connectivity and quality of life.
“From the booming food and drink industry to globally focused manufacturing and a growing creative and digital sector, Kent and Medway is quickly becoming the go-to location for business success.
“With the regeneration and investment in towns and communities across the county from Ashford to Canterbury, Medway to Folkestone, we have all the ingredients in place for a future-facing and thriving, vibrant economy.”
The Kent Property Market Report is supported by Clague Architects, Cripps, DHA Planning, Kreston Reeves, Handelsbanken and RICS.