Property forecast: Lancs in danger of being left behind

POLITICAL in-fighting in Lancashire could cause a widening of the gulf in economic performance between the region’s two main cities of Manchester and Liverpool and sub-regional parts of Lancashire in 2011, according to one regional property agent.

Simon Reynolds, a director of GVA’s Manchester office said that the fact that many parts of the sub-region have not yet had a Local Enterprise Partnership bid approved while Manchester and Liverpool have both managed to access significant chunks of funding from the European Jessica fund means that “clear blue water” will begin to appear between the North West’s main cities and its smaller centres.

Setting out his predictions for 2011, Reynolds said that Liverpool and Manchester were the only areas that had new office schemes commoitted or available that would continue to drive new business for the area.

The populating of a completed Media City will make a major difference to Salford Quays and its environs. Preston’s Tithebarn will have a similar positive impact upon the City that Liverpool One has had on Merseyside. Chester may see its new central business district committed, which will raise its profile to a level not seen before.”

John Keyes, a director of DTZ’s Corporate Real Estate Consultancy team, said predicted a tough year ahead. He said that although 2010 had been an uncertain year in terms of both the election and the talk of looming cuts in the run-up to the Comprehensive Spoending Review, it is only now that the pracytical implications of how these cuts will affect various markets is being discovered.

“2011 will be the year when organisations will have to start to deliver,” he said.

“Major cuts will need to be achieved, most of it through significant headcount reductions. The public sector will need to effect a substantial rationalisation of its estate, with property making a major contribution to overall savings. “

He said that the surplus building stock coming onto the market could further suppress an already difficult market for secondary office stock.

“The public sector will need to find alternative approaches to achieving value, including viewing their surplus property as an equity contribution in joint ventures alongside the private sector, with returns only being secured over the medium and longer term.”

David Murray, an associate partner at the Manchester office of property consultants Sanderson Weatherall, said that the demise of the RDAs and the lack of much public sector regeneration cash was just one of a number of issues the property market faces during the early part of next year.

“The failure of many developers and contractors and the banks’ consequent risk-averse attitude to lending has made it very hard for people to make decisions on developments,” he said.

GVA’s Mark Rawstron (right) believes that banks will release more stock back onto the market in 2011 as greater realism creeps in over pricing and the banks’ own balance sheets start to improve.

“The lack of stock at the right price has been a major inhibiter of activity and recovery in the secondary markets. With the weight of equity in the overall market, 2011 could be the year of increased activity levels in the investment market.”

Indeed, in many parts of the property market 2010 was a much better year than expected. creating decent foundation on which a recovery might be built.

Lettings in the Manchester office market reached record highs, and in its latest market report Jones Lang LaSalle predicted that rents for Grade A office space will rise over the next 12 months as supply begins to dry up.

It pointed to a number of major investment deals being signed during the year, including the £183.5m sale of 3 Hardman Street to Aerium and the £45m sale by property entrepreneur Bill Ainscough of his 40 Springardens building (left) to London-based  fund Climate Change Capital.

“The North West office and industrial markets performed surprisingly well in these very testing times and the lack of new build in both sectors could mean we may face major demand and supply issues in 2011,” said Mike Walker, head of Colliers CRE’s North West office.

GVA’s Andrew Pexton predicts that there will be at least two major design and build deals signed for large industrial shed for next year as existing stock dries up, which will set new levels in terms of rental premiums.

Occupiers seeking to relocate should move fast or be left to compromise through less cost-effective design and build opportunities or poorer second-hand accommodation,” said DTZ industrial team director Anthony O’Keefe.