However, the development taps have
Freehold demand has fallen in line
already been turned off. There is relatively
little ongoing development scheduled for
with the scarcity of finance. Banks
completion later this year, so that stock
levels should now have stopped rising, and
will have to more willing to lend.’
will start to decline. That looks very
different from the situation in mid-2008,
when the market started to turn, and new
region. And he admits that most new occupiers will pay and the prices space was still coming on to the market as
industrial rentals now are for small areas of developers are willing to offer. Some major developments were completed.
floorspace – 800 to 1500 square feet. developers have been looking to buy up Just how quickly development stock will
GVA Grimley paints a less happy picture large vacant spaces and chop them up into be soaked up is debatable, though – given
of South Wales industrial space, having smaller units – that can be quite profitable. the current low level of interest, it could
already seen a marked decline in enquiries But developers will not over-pay. “If an take two or three years. Second hand stock
by the end of 2008. Starting rents are now owner-occupier came along,” Young says, “ will also be coming back on to the market
as low as £1 per square foot, compared you could get £3m for the same space that – and competition from cheaper
with £30-40 per square foot before the you could only get £1m for from a refurbished properties could erode rents
market decline, and GVA Grimley gives a developer. But you might have to wait a lot further for newly developed stock. So while
£20-25 range for current rentals. longer to sell it.” we may be bumping along the bottom, we
Banks have almost stopped funding Of course the other factor affecting the certainly haven’t turned the corner yet.
industrial space, wanting to see any scheme industrial market has been finance. While Still, some investors are champing at the
at least 30 per cent pre-let. New lettings are still being arranged, freehold bit. Valuations already discount further
development in Wentloog and along the demand has fallen in line with the scarcity declines in rental levels, according to the
foreshore is coming to an end and no new of finance. Banks will have to be more bulls of the property market. With prime
development is being started; it may be at willing to lend before this market picks up. office yields in many locations back to the
standstill by the end of the year. 2003 level, it’s not surprising that investors
In such a thin market, valuing properties Financial taps turned oFF are beginning to look for bargains.
is difficult. Owen Young says that The picture that emerges from both Colliers CRE said in its Property Pricing
“comparables are very few and far Birmingham and Cardiff is of very thin Survey in March this year that “Buying is
between.” The mix of business Alder King activity, with stocks at a record high, now back on the agenda with all sectors
is taking on has changed, with a much enquiries at a record low, and rents seeing increased activity.” As yet, the level
more significant amount of asset recovery consequently falling by up to 50 per cent of transactions hasn’t picked up – but there
work – valuing for liquidations and from their peak. Rising unemployment is is some pent up interest in good quality,
administrations. “Valuing those is a likely to further weaken demand, and fully let buildings with good tenants and
difficult job,” he says – forced sellers never further rental declines are likely. Increased covenants and a stable, secure income
get the best prices. incentives are also being seen in both stream. Good to hear a positive comment!
He also notes that in industrial space, a markets, with increased rent free periods,
two-tier market has developed, with a huge as an attempt to limit the damage to rental
Any feedback or comments to add?
difference between the prices that owner levels and valuations.
www.propertydrum.com/articles/citystory
PROPERTYdrum JUNE 2009 73
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76