BHEAA Commercial Property Report 2012
11 January 2012 By Phil Graves
*It has been four years since I last wrote the report for this sector and what a turbulent period it has been for the industry. *
The initial two years of the dramatic fall into recessionary times came as a shock to most. It was more of a cliff fall than a gradual decline and many didn’t see it coming. The following period was one of disbelief and concern, resulting in limited transactions in the market. The only activity was through necessary relocation or mostly downsizing or subletting. Growth in almost every sector was scarce and even the Government and senior banking officials could not accurately forecast what the future would hold for the economy.
As we moved into 2010, business confidence grew and although it was still a rough ride for many, at least everyone knew and understood the new market conditions. Increased transaction numbers, but a stagnant market for rents and capital values. 2011 proved to be more of the same, but it is worth noting some differences in market trends for the city of Brighton and Hove as oppose to some other areas in the UK.
Retailing is still the largest sector with Brighton still a special place to shop. The core area of Churchill Square has stood up well aside from some of the national casualties and rents are stable from £150 psf upwards. The Lanes and especially the North Laine area trades well and new operations exist with market demand strong. Rents in the Lanes can be as high as £100 psf, with a scarcity of units available in the continually popular thoroughfares of Duke Street, East Street and North Street. Interestingly, the average vacancy rate for the UK is around 14% with certain areas topping 20%, but the latest report for the city is around 5%.
The office sector is also vital as it brings with it a high level of employment opportunities. The new Amex building is significant and they now boast the highest employment numbers in the city. Refurbished offices in Queens Road, Gloucester Place, coupled with new developments around Brighton Station, should see more companies being attracted to the area, with special interest from the digital media sector. Rents levels for such buildings are now at £20 – 22 psf - a 15% rise over recent years.
The industrial sector shows little excitement. Rents have remained at the same level for some years with no prospects of change. It is the smallest sector of the commercial market for the area and with no new build on the way, it does question as to whether we are a city suited to industrial and warehousing needs. The outlying areas of Newhaven and Shoreham I believe are better equipped. Rents are between £6 and £9 psf on average.
As far as the investment and development sectors are concerned, they are basically being starved of cash. Debt finance is hard to find with some Banks having completely withdrawn from the property market. Ironically, interest rates remain at an all time low, but with higher deposits required and selective lending, it doesn’t help the majority. Yields for the better located and quality tenanted stock can be as low as 6%, with short term let property in secondary locations up to around possibly double digits - cash only and not for the faint hearted! Development prospects are limited due to lack of funding and pre-lets, so certain ‘blots on our landscape’ are probably here to stay for a little longer. Perhaps with a proactive and open minded approach to planning, we maybe able to entice such developments to take place, especially in the areas of needed regeneration. Lets get some much needed housing and employment on the way to sustain the strength of the area.
The BHEAA and the City’s commercial agents are able to offer solid professional advice to their respective clients and will continue to have a duty to ‘sell’ the area to new incumbents. It should be sufficient to see us through this period of slowdown and as a recent report suggested, Brighton and Hove is ready to be a ‘Super City’ of the future.