But Mucklow rules out imminent return to developing without pre-lets

HALESOWEN-based developer and investor A&J Mucklow Group says there are signs that the Midlands property market is slowly improving.

But announcing its results for the year to June 30, the firm said values still remain 30% below 2007 peak levels and announced it would not be developing speculatively unless rents rise.

Chairman Rupert Mucklow said: “We shall continue our strategy of steadily growing income by accumulating and managing our modern portfolio of quality investment properties, which should benefit significantly from capital appreciation in the medium to long term when occupier demand and rental growth resumes.”

The firm’s underlying pre-tax profit, which excludes revaluation movements and profit on the sale of investment and trading properties, increased marginally from £13.4m to £13.5m. Gross rental income received rose from £20.2m to £20.4m.
 
Mucklow said that over the last 12 months it has continued to actively manage its property portfolio, negotiating a number of lease extensions and securing long-term funding to support investment acquisitions.

“Business confidence appears to be improving in the industrial property sector, which is reflected in a positive valuation uplift for the year. However, provincial offices and retail property are still suffering from weak investor and occupier demand,” it said.
 
The firm’s vacancy rate at June 30 remained low at 6.7% (2012: 6.5%). This figure included 40,000 sq ft of industrial space which was returned to it on June 25 following the expiry of four leases.
 
“We have continued to see steady occupier demand for our vacant industrial property. Letting incentives have hardened, but the market is still not strong enough to start aggressively enhancing rental levels, particularly without evidence from any new developments,” it said.
 
“There is still a real shortage of good quality industrial space across the Midlands. However, demand is currently being satisfied by the limited supply. There is some interest in pre-let development, which may set higher rental levels, but we need to see rents rise by at least £1 per square foot before we will start any speculative development.”