Special Feature: Commercial Property

    To participate in this feature contact:

    Nathan Inns (Thames Valley) – nathan@elcot.co.uk – 07825 604444
    Alan Lindstrom (Solent) – alan@elcot.co.uk – 07305 582269

    Reviewing the property market

    With any market review context is key.  Seven months on since lockdown on March 23, the return to normal seems a distant aspiration, with increasing unemployment, tightening restrictions on home and work life and the prospect of a no-deal Brexit at the end of the year.

    Investment

    Although transaction levels over the past quarter have been at approximately half the levels seen in the past two years, momentum appears to be increasing. The most significant recent transaction locally, was the sale of Reading International Business Park at £120 million – £10m below the asking price of £130m in 2019.   

    In general, pricing has remained constant across the sectors, except leisure and high-street retail, which remain out of favour. However, the desire for industrial continues unabated in the Thames Valley as elsewhere, fuelled by the growth of online retailing and customer fulfilment of ambitious delivery promises.   

    For many landlords, the extended government moratorium on the normal means of commercial rent enforcement has left them without any income since the March quarter, with the landlords of retail properties being the hardest hit.

    Retail and leisure

    While the demise of many household names has unsurprisingly dominated the headlines, the boom in demand for some retail premises, seems to have passed by relatively unnoticed.  This began sharply upon the lifting of lockdown in June but had burgeoned since. Food-related operators led the way followed by those businesses which had benefited from the behavioural changes brought about by the pandemic, including animal care; home improvement and sports clothing/footwear. The focus has predominantly been for units in local and suburban centres, close to residential neighbourhoods and home workers, rather than the larger towns.

    Rents have been affected accordingly. Whereas larger towns have seen reductions in many cases up to 50%, the impact on local and suburban centres has been modest.

    Office and warehousing/industrial

    The pandemic has had a significant effect on the Greater Reading office market. Hicks Baker Research has been compiling office take-up data since the early 1990s which indicate that 2020 is on track at least to equal the market’s weakest ever recorded annual performance.

    Just 83,477 sq ft has been let in the first 9 months of the year (compared to 500,000 sq ft in 2019) with well over 90% of all lettings being for out-of-town locations. In fact, there has been only one deal in excess of 5,000 sq ft in Reading town centre – the recently announced letting to Isio at Thames Tower (5,040 sq ft).   The landmark building (opposite the station) is now fully let, even if not fully occupied.

    Most letting activity has centered on Winnersh Triangle, where two of the larger lettings included 31,743 sq ft, to HP Inc and 10,700 sq ft to Hollister Medical. Elsewhere, Commvault Systems relocated from the town centre to 12,917 sq ft at 1310 Arlington Business Park, Theale.

    With the economy now officially in recession and further restrictions anticipated, it is difficult to envisage any immediate improvement in market sentiment before the year end.

    In contrast, the warehouse and industrial sector has recovered well in the second half of the year. Pent up demand was released post-lockdown, initially for smaller units, but this trend has not only been sustained but has extended into larger size brackets up to 50,000 sq ft.

    This positive sentiment has been underlined by McKay Securities’ recently announced letting to Amazon of their new 135,000 sq ft development at Theale Logistics Park and there is little reason to suggest why this should not continue.

     

    hicksbaker.co.uk

    Special Feature: Commercial Property

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