property LSH: South Coast property market pushes on
Over 50 property sector specialists were given an exclusive snapshot of Lambert Smith Hampton (LSH)’s latest South Coast Market Index Review during a networking event held at Southampton’s Solent University. With some exceptions, trends across the main property sectors are generally positive, says LSH
South Coast Market Index Review
LSH’s annual index charts the progress of key commercial property sectors in the areas running along the M27 from Southampton to Havant and up the M3 corridor to Winchester. Boris Johnson’s election as prime minister in December capped a fairly tumultuous year for the property sector and should calm the nerves of developers and investors in 2020.
Graham Holland, head of LSH South Coast, said: “Overall, our view is positive. Unless Boris bombs in a big way, we expect to see growth continue in the commercial property sector. Another strong indicator in January 2020 is that the residential housing market is also picking up. Houses are starting to sell and you need strong residential development alongside commercial.”
The planned redevelopment of the former Toys R Us site near Southampton railway station should demonstrate how commercial and residential property can combine in what will be an ambitious scheme for this ‘gateway’ site. Paul Shuker, director at LSH, said: “We have been involved since the site closed in April 2018 and hope to go forward with a planning application this summer for a mixed-use scheme that will be an economic driver in the city centre, as well as offering 400 residential units. It’s a really exciting project that will be a huge catalyst to improve the area.”
Industrial and logistics sector
It was a strong 2019 for industrial property in terms of the average square footage of space taken up, although the volume of deals was lower than in 2018. “Take-up of 1.84 million square feet was up 4% year-on- year and just above the five-year average,” said Dan Rawlings, associate director at LSH. “Availability increased 4% compared with 2018.”
Elise Evans, associate director at LSH, gave examples: “We saw the Nelson Centre in Portsmouth acquired by Aviva and let on a 10-year lease with strong rental income. At the western end of the region, Amazon moved into a newly refurbished former Biffa site. A variety of sizes are being built speculatively across the region, from Southampton to Chichester, which will encourage churn in the market.”
In terms of rents achieved, Portsmouth overtook Southampton for both new and
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businessmag.co.uk Graham Holland Paul Shuker
refurbished sites. The general election result provided a much-welcomed confidence boost, reported Rawlings. “There is more decisiveness and the number of enquiries we are receiving is going up.”
Office sector
Despite 2019’s Brexit uncertainties, LSH’s index found a good level of positive sentiment in the office sector. “We can look forward to 2020 with optimism,” said Andy Hodgkinson, director at LSH.
Although the availability of office space was up 7% in 2019 compared with 2018, the take-up of office space rose 8.2% in 2019.
“Half of all transactions in 2019 were for Grade A space as tenants looked to improve the quality of the offices they occupied. 80% of all deals transacted occurred in Southampton city centre, Lakeside North Harbour in Portsmouth and Whiteley’s Solent Business Park. They all offer good quality, corporate-grade space,” he said.
Winchester and Eastleigh have a critical shortage of supply and therefore experienced limited activity in 2019 as a result. These locations nevertheless are in strong demand should new space be delivered in these areas.
Office rents across the region were up in 2019, boosted by constrained supply and rising demand for better quality spaces.
“There is only 3.3 years of available supply across the region and we are now having serious discussions with occupiers about pre-lets on consented office development sites,” noted Hodgkinson.
Retail sector Andy Hodgkinson Alex Hirst
It was another “transitional” year in the retail sector, according to Alex Hirst, associate director at LSH. “A number of big names went into administration, others went into Company Voluntary Arrangements (CVAs). We saw the ongoing penetration of e-commerce, as well as the knock-on effect of political uncertainty on consumer confidence.”
However, 2020 could signal an uptick in confidence. “We believe there will be a modest return to growth in 2020. Research predicts 11.8% market growth in the next five years compared with 8.8% in the previous five years,” he said.
THE BUSINESS MAGAZINE – MARCH/APRIL 2020
© 2019 Lambert Smith Hampton
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