property Simon Stevens Frankie Bryon


Matthew Barker


With online shopping increasing, retail property vacancy rates in 2019 were the highest since 2015.


“Most retailers recognise the need for an omni-channel approach,” said Hirst. “As much as 30% of non-store sales actually ‘touch’ a store, for example, through ‘click and collect’. Customers often buy something at a store when they collect their online purchases.”


Other trends include the spread of discount warehouse operators, such as Aldi, B&M and The Range, as well as an increase in drive-thru retailers with newer entrants Five Guys and Taco Bell joining established names like MacDonald’s and Costa. “Another notable trend is gyms entering prime site retail space,” observed Hirst.


Hotels sector


Hotels are a key component in the South Coast’s property mix, pointed out Simon Stevens, director at LSH, who said 2019 had been one of the most challenging years for this sector. “The number of property transactions nationally was about one third of what we would ordinarily have expected,” he said. “But 2020 sentiment is a lot more positive.”


The budget, boutique and four-star hotel segments continue to perform well, but mid-market hotels are struggling in comparison. “The mid-market sector faces challenges as margins continue to be squeezed, particularly those that lack a strong brand identity, but we think more opportunities will be coming onto the market as owners who have sat tight until now are looking to make changes to their property portfolios,” he said.


Capital markets


Last year was challenging and filled with uncertainty. Yields on prime industrial along the South Coast stood at 4.25% across both multi and single let, said Matthew Barker, associate director at LSH. “When it comes to this sector, despite value being ever harder to find, investor demand continues unabated.”


He highlighted three factors to look out for in 2020 from LSH’s UKIT publication. “We anticipate the volume of transactions nationally to hit around £55 billion; all property total returns to improve to circa 5%, with industrial continuing to lead performance, albeit to a lesser degree than recent years, with returns of approximately 6.5%. And


For more information or to request a copy of Lambert Smith Hampton’s South Coast Market Index Review email Sarah Monk:


smonk@lsh.co.uk


South Coast commercial property market in numbers:


• Industrial rents in 2020 are £10 per square foot (2010: £8 psf)


• Office rents in 2020 are £22.50 psf (2010: £18 psf) • Industrial prime yields in 2020 are 4.25% (2010: 7.5%) • Office prime yields in 2020 are 5.5% (2010: 7.55%)


• Industrial land in 2020 costs £1m/acre (2010: £650,000/ acre).


Source: LSH lsh.co.uk


the value opportunities in retail parks, driven mainly by the potential for alternative uses,” said Barker.


Sustainability issues


With the climate emergency debate grabbing headlines globally, LSH’s event ended on a topical note. “According to UKGBC, the built environment contributes around 40% of the UK’s greenhouse gas emissions, so the property sector is an obvious target for increased regulation as the Government tries to achieve its carbon reduction target,” said Frankie Bryon, head of sustainability at LSH.


She highlighted “low hanging fruit” actions that property owners can take, notably in areas like lighting. “Introducing energy efficient bulbs and energy controls is easy to do and the payback is quite quick,” she said. “We also have to ask whether buildings are being over-specified, as well as look to smarter buildings that reduce energy waste.”


Another major environmental challenge facing landlords is the growth in electric vehicles (EV). “There was a massive increase in EV purchases in 2019 and the Government has brought forward to 2035 the date for banning petrol, diesel and hybrid vehicles. We need to make sure EV charging facilities are available for tenants and employees to support this transition,” said Bryon.


LSH also expects to see greater collaboration between landlords and tenants on renewable energy sources in buildings. “For example, landlords installing solar panels on their buildings and selling energy to tenants. We need to stop viewing sustainability as a business cost and see the commercial gains it can offer everyone,” she said.


THE BUSINESS MAGAZINE – MARCH/APRIL 2020


businessmag.co.uk


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