The 2018 commercial property market in the Eastern region has been extremely buoyant and the absence of stock has seen investors, under the weight of money, driving prices up in pursuit of income as yields harden.
That’s the verdict reached by Barker Storey Matthews in reviewing 2018’s market activity and deals done in its four core property locations, Peterborough, Huntingdon, Cambridge and Bury St Edmunds, from where it serves the whole of the region.
An enduring appetite for freehold investment and the attractiveness of the industrial sector are the two stand out characteristics of the year’s market activity, according to the property agency who sees the office market calming and retail reorganising as the sector comes to terms with high street upheavals.
In commenting on this year’s market activity in Peterborough and Huntingdon, Barker Storey Matthews’ focus is on the return of speculative building and the speed with which occupiers are committing, as well as prices achieved.
The number of new industrial developments in Yaxley, to the south of Peterborough, continues to increase. At Eagle Business Park, construction of two speculative schemes, Harrier Court and Peregrine Court are well underway. These 20 industrial/trade counter units premiere the second phase of the Park’s development by Barnack Estates UK Ltd.
Discovery Business Park in Yaxley is now, practically, complete. It offers freehold and leasehold options in units from 1,650 sq ft to 3,000 sq ft with prices hitting £125 per square foot (psf).
Willow Court at the Lakes Business Park, on the A14, between Huntingdon and St Ives, is a speculative development of four units – two of 2,050 sq ft and two of 2,300 sq ft. All were under offer by the end of this summer (2018), half to investors and half to occupiers at asking terms of just under £122 psf.
The development of the Alconbury Weald Enterprise Campus continues apace. The first floor of the Incubator 2 building has been let to the Cambridgeshire & Peterborough Combined Authority and civic support for the whole development has been boosted by the announcement that Cambridgeshire County Council is to re-locate its headquarters here from central Cambridge.
Anyone visiting Huntingdon or Cambridge cannot fail to notice the rapid advancement during the past year of the construction works to upgrade the A14 in that corridor, with completion scheduled for December 2020.
Industrial take up in the Cambridge office area in 2018 is expected to fall below the 500,000 sq ft spike of last year (2017) but will remain above the ten year average of 275,000 sq ft per annum.
A shortage of second hand stock in the office and laboratory market continues to dominate the commercial property scene in Cambridge. Prime new builds are, almost always, pre-let. Not due for completion until spring next year (2019), nearly all of the 162,000 sq ft of new building 50/60 Station Road has been let at around £42.50 psf.
With Cambridge core city centre rents rising – the highest in the UK outside of the capital – companies are looking out to the more affordable and, increasingly, more accessible business parks beyond the city. Since the start of 2018, the vacancy rate at Cambourne Business Park has fallen from 40 per cent to 15 per cent. Two deals to technology companies have accounted for 74,000 sq ft of take up this year, to date.
In contrast, the lack of office stock supply in Bury St Edmunds has not been the issue this year that it was in 2017 with a limited number of office requirements. There is around 42,500 sq ft of available office space, ignoring serviced and under offer space. The largest single floor plate, 7,300 sq ft, has been vacant for over a year.
However, Hillside Business Park – a mix of office and light industrial space – in the town’s key commercial district is now 100 per cent occupied with the final two units completed earlier in the autumn.
Steels are up at Suffolk Business Park and the first of its new occupiers has been confirmed this year. Plot 0100 has been sold to Festool where the 30,000 sq ft building now under construction will be the company’s new UK headquarters. Further plots are also under offer on the 57 acre business park which is being developed by Churchmanor Estates as part of a wider, 165 acre employment area development.
New commercial development, coupled with some interesting residential developments in Bury St Edmunds and its extended catchment area, should add to the confidence in the local economy. This may help to draw in new investment and businesses who, previously, may not have considered this part of Suffolk as a strategic location.
Commenting on the region’s commercial property market as this year comes to its end, Steve Hawkins, Managing Director, Barker Storey Matthews said, “The sheer weight of money in the market has driven down yields and forced up prices. With predictions of an even longer term low interest economy, investors will be getting used to four to six per cent returns.
“The Brexit debate, while bubbling away again this year, all year, did become a bit tiresome. As we head towards the year’s end, there does seem to be a bit of panic creeping in whether we face a deal or no deal scenario. This is now bearing down on investment decisions.
“Looking to 2019, the next six to twelve months are going to be a bit of a rollercoaster but the fundamentals for a sound commercial property market remain.”