Yorkshire businesses urged to be bold and take advantage of opportunities

NOW is the time for Yorkshire businesses to be bold, optimistic and move forward while the opportunity lasts, according to commercial property experts.

DTZ Research has published its 2014 Annual Outlook report and revealed that the outlook for the regions is much brighter than in recent years with economic growth outside of London forecast to increase by 2.8% in 2014, and 3% over the medium-term, whilst employment is forecast to increase by 400,000 over the next two years.

As a result, occupier sentiment and demand for commercial property is generally strengthening, it said. Take-up is growing across the regions, but availability, particularly for grade A office and industrial space, is falling rapidly, the research claimed.

Adam Cockcroft, head of office agency and development in Yorkshire said that this year, Leeds will probably see some businesses looking for space out of town, due to the lack of grade A city centre space. According to office market data compiled by Leeds Office Agents’ Forum (LOAF), the out-of-town market recorded 200,987 sq ft in the last three months of 2013; a 203% increase compared with the same quarter last year (66,370 sq ft). Of the 22 deals to complete, the largest was Lowell Group taking 81,911 sq ft at Leeds Valley Park.

However, Cockroft also said he thinks Leeds will see a number of companies coming up from London to Leeds this year.

Tim Cameron-Jones, head of DTZ north region and senior investment director, said: “Leeds has been identified in our research as likely to outperform all other UK cities in terms of total returns for office investment. This is driven by a shortage of supply and a strong rental growth rebound.

“In retail, Leeds also has one of the greatest increases forecast for retail spending and industrial rents are expected to return to positive growth.

“Transaction activity across the region will however be hampered by a shortage of supply. In the agency markets this will be partly met by pre-letting activity, and the on-going delivery of high quality refurbished space. In markets where funding is tight, some public sector intervention will assist in bringing forward new development, such as Sheffield City Council’s innovative funding support to CTP to deliver 72,000sqft of new offices in the Heart of The City at 3 St Paul’s Place.”

David Thompson, DTZ’s Yorkshire retail director, said that he believes there is a positive outlook for the retail market in 2014. He said that Hammerson’s Victoria Gate project is going to be a “good thing” for the region.

“John Lewis has been looking to get into Leeds for a very long time. It will raise Leeds on the hierarchy and the John Lewis affect will have a very positive impact on the city centre. It will pull people into the city centre, to the detriment of the other areas, but I think the market will respond in a positive way. Westfield is now on site in Bradford and they wouldn’t be if they couldn’t do it. I am positive that the immediate environment will be ok.”

DTZ added that projects such as Leeds’ first direct Arena and Barnsley Council’s plans to take over the development of the town centre after failing to attract a private developer, could well be the start of local authorities becoming more involved with development.

On the industrial market, Paul Mack of Yorkshire’s industrial team said this that the industrial sector is one which is rapidly changing. He said it is at “tipping point”.

“We are quite simply running out of buildings,” he said.

DTZ’s report claims that investor appetite for commercial property assets is increasing and volumes have risen markedly. The record yield gap between London and the regions, and between prime and secondary property, is encouraging investors to move up the risk curve. However, the window of opportunity is closing as the yield gap is forecast to narrow and regional markets becoming less undervalued. 

Richard Yorke, UK head of research at DTZ and co-author of the report, added: “Congratulations. You’ve made it to 2014. This has been the longest and deepest recession in living memory and it has been horrible. However, there is light at the end of the tunnel. Based on its relative attractiveness, investors’ appetite for commercial real estate is very strong. This is further helped by a normalisation of the lending markets. But, investors should take advantage of current pricing quickly before interest rates rise. At the same time, prime opportunities have become less attractive. Consequently, investors need to consider secondary assets and locations more closely, which are still attractively priced. Investors need to be bold and move quickly to take advantage of this limited time opportunity.”