Market Monitor, Alder King’s definitive review of the region’s commercial property market, reveals the strongest level of regional take-up for seven years and a correspondingly sharp drop in supply, compromising the ability of businesses to relocate and expand. The detailed review of 2014 activity in 12 major centres highlights a pressing need for further speculative office and industrial development in and around Swindon as well as other centres in the South West.
The 30 page report shows Swindon office take-up rose last year by 14% to 227,000 sq ft, the highest level of take-up since the recession. Significant out of town demand came from Nationwide and Swindon Silicon Systems which took space at Kembrey Park and Interface House in Royal Wootton Bassett respectively while the town centre market saw a significant improvement, accounting for 30% of total take-up, mainly due to railway electrification service providers seeking representation close to the station.
The improvement in demand and the conversion of poorer quality office stock for residential use has eroded supply to its lowest level for 10 years. This lack of supply has helped push up the headline rent for town centre space from £15 per sq ft to £16 per sq ft. Out of town rents remained constant at £17.50 per sq ft although quoting rents and tenant incentives are being reviewed as landlords seek to take advantage of improved market confidence.
The lack of large industrial transactions in 2014, caused mainly by a lack of suitable supply, saw industrial take-up fall 43% to 557,000 sq ft, its lowest level for over 10 years. There are several large requirements in the market which are expected to complete early this year and will bolster the figures for 2015. The majority of activity in the market was in the sub-5,000 sq ft sector which accounted for 57% of transactions.
Supply decreased only marginally to 1.7m sq ft as the former Triumph and TD Packaging buildings at Groundwell Industrial Estate both became vacant last year. There is a speculative new build scheme providing buildings on the former Farepak site at Westmead and the 100,000 sq ft Metro Building at Groundwell Industrial Estate is being comprehensively refurbished.
The retail and leisure market in Swindon was given a major boost with the opening of the Regent Circus development at the end of last year. Not only did the scheme immediately change hands, being acquired by UK CPT Ltd for £40.5m, it has been the catalyst for major improvements to the immediate area and occupier demand has been strong.
Swindon has also benefited from the strong regional investment market, with £76.5m of investment transactions in 2014. This is a 14% increase on last year’s figure and the highest value of transactions since 2007.
James Gregory, partner at Alder King in Swindon, said: “After a very strong finish to 2014, 2015 will see further increases in activity levels across all property sectors with robust demand for quality commercial space and well-located sites together with further rental growth.
“The challenge for 2015 is to bring forward more speculative development in key locations to replace dwindling stock and meet rising demand. There is strong occupier appetite for Grade A accommodation. Further office and industrial schemes need to come on stream over the next 12-18 months if developers want to capitalise on this market cycle.”
South West Overview
The supply of office space in the South West is down by nearly 20% to just 3.8 million sq ft compared to 4.8 million sq ft in 2013. In the industrial market, supply fell by over 16% from 6.8 million sq ft to 5.7 million sq ft of stock. However demand is focused on better specified space and industrial new build activity is now underway in Bristol, Gloucester, Wellington, Bridgwater, Truro and Swindon.
The retail sector stabilised in 2014. The majority of high streets saw a reduction in the number of voids and some centres including Exeter, Plymouth and Swindon saw a growth in rents.
The South West remains attractive to investors looking for value outside London. The total value of the South West investment market rose from £695 million in 2013 to £1.07 billion in 2014. The two largest transactions were the sale of 50% stakes in two of the region’s leading shopping centres – Cabot Circus in Bristol and Princesshay in Exeter.
Alder King’s Market Monitor 2015 provides a summary of the commercial property market in Bath, Bridgwater, Bristol, Exeter, Gloucester, Plymouth, Swindon, Taunton and Truro. It also covers Cardiff, Newport and Swansea in South Wales. The full report is available to download at www.alderking.com/publications. A mid-year update will be published in July 2015.
Pictured above: James Gregory, Partner at Alder King, Swindon