The East Midlands Office rents hit new high as stock dwindles - LSH A


lack of office space for


Ian Leather


businesses that want to expand or relocate is driving up rents in Northampton, according to national commercial property consultancy Lambert Smith Hampton (LSH).


Whilst the shortage of available stock may be bad news for businesses, it is good news for landlords so long as they invest in their buildings aiming to provide “better than average” accommodation, said Ian Leather, head of office advisory at LSH in Northampton.


According to the latest LSH Office Market Pulse, a new headline rent of £18.50 per sq ft for existing space was recorded in Q2. Century House, on The Lakes, comprising 9,300 sq ft of office space, was fully refurbished by Schroders REIT and has been let on a 10-year term to


Tale of two cities’ success as office demand rises - LSH


Talent Works to accommodate significant growth in their business.


Ian added: “At the same time, LSH managed to negotiate an assignment of the exiting TW lease at Queensbridge where Venture Contracts took over 3,625 sq.ft. Both deals reflecting the growth of local companies and the need for better quality offices in the market. LSH has also negotiated a new headline rent on Northampton Business Park with 4,000 sq.ft let to Orbit Housing at £16 per sq.ft.”


Current activity is muted but largely restricted by a lack of available quality space. New development is due to start in Q3 on Waterside Way at The Lakes when we will announce new prime headline rents in excess of £20 per sq ft and a significant upward shift in capital values.


“Currently there is around 100,000 – 125,000 sq ft of unsatisfied occupier requirements which continue to be held back due to the lack of new stock being delivered and a lack of choice. This is great news for landlords who invest wisely in their existing buildings and provide better than average space,” he added.


M1 south industrial space demand at all-time high, latest bidwells research finds


I Paul Davies


ndustrial space demand in the southern M1 region is at an all-time high – Bidwells’ latest research reveals – defying recent economic warnings of


an impending slowdown in the star- performing industrial and logistics property market. Demand for industrial floor space reached 8.7m sq ft in the first half of 2018 - the highest level recorded in the 15 years Bidwells has been collecting data for this region - with more than 30 requirements for units of 100,000 sq ft and above registered with the property consultancy.


The record figures follow the warning from independent economic researchers, Capital Economics, earlier this month, that rental values in the industrial sector are “starting to fade”.


Bidwells which looks at the industrial market twice yearly, found that prime rents


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in M1 South are at £8.25 per sq ft, up 1.3% in a year and up 32% since the end of 2013.


Paul Davies, Partner, Business Space Agency at Bidwells, said:


“The debate about whether the industrial sector is overheating will run and run, I’m sure, but the fundamentals of the market in the M1 South region are strong. Based on old principles, the market may look fully priced, but we are in a new era and the distribution market is being driven by different influences and occupiers.”


“Gazeley has just completed a 574,250 sq ft distribution unit (Altitude) on a speculative basis, proof, if you need it, that the M1 South region remains one of the most attractive regions of the UK for investors and developers. We are not suggesting this current growth cycle will continue everywhere, forever, but the M1 South market should continue to see growth over the next 12 to 18 months. The market is looking robust and there is certainly further for it to go.”


L


eicester and Derby have seen demand for office space rise significantly during the last three months, which has seen more than 30 deals completed across the East Midlands, according to national commercial property consultancy Lambert Smith Hampton.


In Derby, at 44,147 sq ft, Q2 take up had increased by 223% on the previous quarter and 430% higher than the same quarter in 2017.


Leicester saw an increase of 90% on Q1 2018, with 80,263 sq ft of take up – more than twice the level recorded in the same quarter last year. Meanwhile, in Nottingham, Q2 take up was down 20% on the previous quarter at 62,525 sq ft. That was 38% lower than Q2 2017.


Phil Quiggin, head of office at LSH in Nottingham, said: “It’s a mixed picture across the East Midlands, with some areas performing much better than others. For example, in Leicester we saw 16 deals of significance including seven over 5,000 sq ft. The largest deals being 15,000 sq ft to an unnamed occupier at Leicester Waterside and 12,431 sq ft letting to Leicester Mercury at 16 New Walk in the city centre.


“Availability continues to fall, now just under 382,000 sq ft across the wider market, and over 80% of which is in the city centre. The only building providing Grade A space in Leicester is the remaining space in Colton Square now accounting for 2% of supply.”


In Derby, 10 deals were recorded with two over 5,000 sq ft – the largest being the letting of 13,269 sq ft to Pattonair at Brunel Parkway, Pride Park. Availability stands at 430,000 sq ft, but there is zero Grade A space available following recent lettings, said Phil.


There were only 12 deals of significance in Nottingham in Q2, three of which were greater than 5,000 sq ft – the largest being 15,138 sq ft at Equinox in the city centre. Availability continues to fall, now standing at 813,000 sq ft across the wider market, split 60/40 in favour of the out of town market. Some 36% of stock is Grade C and in need of refurbishment, while only 12% is Grade A.


Phil added: “In all three cities enquiries remain good but Q3 will be a challenging quarter with take up likely to be held back by limited availability.”


COMMERCIAL PROPERTY MONTHLY 2018


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