2016 Buoyant Commercial Property Market Set to Continue

Mark Clancy’s annual Preview of the Commercial Property Market in the M3/M27 corridors.

2016 will be another good year for the M3/M27 property markets with values continuing to improve across most sectors.

The buoyancy in the market will be driven by increased and more diverse demand, an ongoing shortage of stock, (particularly Grade A space) and underlying business confidence reflecting the current stable economic conditions.

The squeeze on available space will result in rents continuing to climb and this in turn will encourage further investment into our region and as illustrated recently by Mountpark’s acquisition of the former Ford Transit site in Southampton for a 450,000 sq ft logistics park and Greenridge’s purchase of the National Air Traffic 260,000 sq ft campus at Solent Business Park.

There will also be pressure on tenants to accept longer lease commitments and reduced incentives as the market becomes more competitive and this will also promote further speculative development to add to such recent schemes as Harbert & XLB’s 108,000 sq ft Pinehurst office development at Farnborough Business Park and Goodman’s 339,000 sq ft distribution centre at Andover Business Park.  The key to further schemes will be the anticipated improvement in rental levels particularly in order to spur any new office development.  In this respect, Basingstoke should benefit from the recent designation of 13 hectares at Basing View as an ‘Enterprise Zone’, providing 100% rates relief for new occupiers for a period of five years and releasing substantial funds for investment into local infrastructure through the Local Enterprise Partnership.

Capital values across the region will also increase, but probably more gradually given that property investment yields may have reached their lowest point in the current property cycle. Investors will also need to start considering the impact of the Minimum Energy Efficiency Standards (MEES), effective in just over two years.

In 2016 there will be steady growth from the industrial and warehouse property sector within our region, with new requirements from online retailers and associated operators pushing forward demand for the limited stock and adding to the pressure for rents to increase beyond the current levels of £11 per sq ft for Grade A space in the upper M3 corridor and £8.50 per sq ft in Southampton.

The office market will also continue to improve given the diminishing stock levels and ongoing competition from PDR residential conversion and driving Grade A rents above £19 per sq ft in Southampton and Basingstoke, to £22.50 per sq ft in Winchester and above £25 per sq ft in the Blackwater Valley.

The retail property sector should also continue its gradual recovery over the next twelve months as town centres within our region embrace a mixed use retail/leisure and residential approach in order to maintain footfall and vibrancy.

2016 is set to be an exciting year for commercial property in the M3/M27 corridors as confidence and improving values fire the market and further development and investment across the region.  It will be a year to take advantage of the benign market and economic conditions and as ever maximising returns through the taking of the right specialist regional property advice.

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