Deal or no deal: The property sector maintains a positive position
Charles D’Auncey, director at Harris Lamb, recaps on the property sector’s success of 2018 and provides an outlook for the coming year as the Brexit negotiations continue.
Two-and-a-half years have passed since the EU Referendum vote took place, and in spite of a distinct wobble in Parliament last month, the initial panic that ensued has given way to a ‘business as usual’ approach in both the commercial and residential property sectors.
With a deal yet to be determined and less than 12 weeks to go until Great Britain leaves the EU, there are still conflicting views on the impact the eventual separation will have, but the current market is buoyant in both sectors. Not only is the residential market holding its pace – property prices have increased slightly in recent months, developers’ stock prices have gone up, and the demand from house-builders for land in the Midlands is high.
Our residential team has a number of sites coming to market in the coming 12 months following on from the success of high profile land sales in 2018, including the former Hall Green Stadium last April, and the Caparo factory site in Walsall, which is close to sale. The team has been working closely with West Midlands Mayor Andy Street, Walsall Council and Cllr Mike Bird in particular to meet the call from developers to provide more housing sites across the region, and has developed partnerships with house-builders including Persimmon, Taylor Wimpey, Galliford Try, Lovell Homes, Redrow Homes and Lioncourt Homes, all of whom are keen to continue the regeneration of the region.
The commercial market remains strong, with continuing pressure on developers to commit to speculative industrial projects within the region. The short supply of high quality – and not-so high quality – industrial property has been a common grumble in recent years, with occupancy levels of around 95 per cent, occupiers reluctant to move away from the area, and demand for warehouses with a floor-space of between 40,000 and 60,000 sq ft has being particularly high. Fortunately, the last three years have seen a number of developers acknowledge that demand and rise to meet it with the result that the amount of speculative warehousing has increased by 50 per cent year on year.
Thanks to a string of deals on speculative units , the most recent being Mayflex committing to a 65,000 sq ft new-build unit at the Advanced Manufacturing Hub in Birmingham, take-up being at is highest level since 2012 with around 6.5m sq ft of take-up in the region to date– an impressive figure in light of the still-uncertain economic climate.
Perhaps because of that uncertainty, occupiers have been noticeably active during the last six months, with an above-average number of opportunities being placed under offer and leases signed; perhaps being keen to close the deals before circumstances begin to change.
With that demand in mind, it’s no surprise that there is a relentless desire to invest in the Midlands, with the industrial and logistics sector showing a particularly high demand, resulting in record low yields driven by the lack of supply and rising rents.
This scarcity of good quality investment opportunities has led to competitive bidding for available stock which has, in turn, led to significant yield compression, a trend which we expect to see continue for quality assets in key locations as we move into 2019.
Regardless of how Great Britain moves forward with its plans in the coming weeks, 2019 looks set to continue where 2018 left off – with businesses and developers alike being proactive, progressive and and continuing to set their sights on the Midlands, be it with the intention of securing a presence there, or seizing opportunities to invest, occupy or build within the region as and when they arise, and adapting their strategies as events take their course.