Commercial property expert Edward Preece gives TBE readers an insight into the current commercial property market.
Working in the property industry provides a great insight into many business sectors and the challenges they face. For property advisors, the better we understand our client’s business, its objectives and the property related barriers to achieving these, the sooner we can find the solution and the route to achieving it.
Such challenges can range from those faced across a business sector to those which are company specific. In this article we look at the former – the impact of changes within two particular business sectors due to structural developments and the wider economic influences.
The structural change currently taking place in the food retail sector is unprecedented over the last 30 years, with the previous, seemingly inexorable, growth of the ‘big four’ (Tesco, Sainsbury’s, Asda and Morrisons) now in reverse. Figures show that the big four dominance peaked in 2011 with a market share of 81%, has since reduced to 78% and seems set to continue to fall.
The new players in town, relatively speaking are the discounters – dominated by Aldi and Lidl – who are outperforming the big four with a collective market share rising from 2% in the late 1990’s to over 8% today.
Aldi currently has a £600m expansion plan, looking to open 65 new stores this year, and Lidl are looking to open a further 20. We have witnessed first-hand their appetite for expansion with client sites in two different parts of the country going under offer to Aldi for their new store formats of 17,000 sq ft on 2 acres.
Against the backdrop of this structural change, there have also been the well-publicised problems at the Co-op which, though largely arising from its banking division, have caused a brighter light to be shone over its overall business strategy. The consequence for its food retail division appears to be an intention to re-focus on the convenience sector, shedding its larger stores.
From a boom to recession to boom within six years, the residential development sector is one which mirrors, probably more than any other, the economic fortunes of the country and, in particular, that of the general public.
A great example of the roller coaster nature of this sector is where a longstanding client sold a site at the top of the market in 2007/8 to one of the big national house builders. 12 months later our client was asked if he would buy it back at 1/3rd of the price paid. Five years on and we are in the midst of another house building boom with the associated issues that follow – rising land prices (again) and shortage of construction materials and labour.
The relaxation of planning laws has helped drive this boom and, in particular, the ‘Interim Housing Supply’ policy, with which people living in rural areas will be familiar. Simply put, this policy means that if the Local Planning Authority cannot demonstrate six years supply of housing land (based on central government figures) then it will find it very hard to turn down planning applications for new housing development, wherever it is proposed.
Whilst this policy is bringing the increase in the rate of new build the government is seeking, it is questionable whether it is delivering the houses where they are most needed and at a price level which is affordable to those most needing them.
Although constant change means forever facing new challenges, it’s something we embrace and enjoy. The experience gained with each project in the ever evolving property environment brings a broader & deeper perspective to the next.
Pictured above: Edward Preece