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Commercial Property News For Kent, Surrey & Sussex
- November 2011
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To view our extensive range of commercial Office and Industrial properties
that are available to buy, lease and rent in the Kent, Surrey & Sussex area
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KENT SURREY AND SUSSEX REGION
COMMERCIAL PROPERTY INDEX PAGE... |
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Tough going
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| Normally the commercial property market in the counties close to London reap the benefit of the performance of the capital city, which has been enjoying a strong run in the past two years or so. But this is not happening at the moment and in the three counties agents agree that the market is tough going. This view is echoed in the market survey by the Royal Institution of Chartered Surveyors that said: “Improvements in the market seen in the first half year faltered during the third quarter as occupier demand fell back for the first time in 12 months.” Even London was less buoyant which may be one of the factors that is making it harder work in the three counties. The main barrier is a lack of confidence as agents and developers digest the flow of gloomy predictions. As far as the industrial market is concerned, Charles Binks of Knight Frank said: “Market activity was subdued in the first half year in London and the south east. We anticipate a general weakening over the next 6 to 12 months as deteriorating consumer confidence and public sector austerity measures ultimately impact upon logistics demand.” That is not preventing deals and continued development, such as at Kings Hill in Kent where the steady process of improvement continues as Liberty Property Trust takes the long view. A similar view applies to Kent Science Park, Sittingbourne. While the Kent Property Report paints a reasonably optimistic picture with the stronger performance of 2010 continuing into 2011, it does say that “take up in (business parks) has been subdued in the first half year.” The report noted the high occupation rate at Kings Hill and that in north Kent “Crossways continues to draw in major occupiers.” That applies to offices and industrial, where Schooner Park, Crossways has attracted a steady stream of new tenants, such as Milton Keynes Paint & Equipment. Broadly speaking, yields have fallen for office properties.
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industrial dominates
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| Judging from the Locate in Kent (LIK) figures, the market is holding up reasonably well, being on target for inward investment in the first half when it pulled in 40 occupiers. What was noticeable is that demand for industrial property increased to 60% in 2010-2011 from 39% in the previous year. Peter Symons of LIK said that a planning application for the Vestas wind turbine factory at Sheerness was going in before the end of the year and “the consultation process has been positive.” But he suggested more government support was needed for the industry.
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Astellas buys in Chertsey
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| Astellas Pharma Europe, which is currently based in Staines, has bought the 9,303 sq.metres building in Hillswood Business Park, Chertsey, from Electronic Arts. Advised by Knight Frank, (DTZ for Electronic Arts), Astellas paid £16 million for the Sir Norman Foster designed building, which is set in landscaped grounds of 7.54 acres and with an adjacent development site of 6.13 acres. Hillswood consists of three headquarter buildings, the other two let to Samsung and Regus. At the moment Astellas occupies three properties in Staines so it will refurbish Building 2000 at Hillswood before moving in mid 2012.
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In Brief #1
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| Chris Boulter of Cantium is looking forward to substantial changes in the market and is now close to recruiting more staff for future growth. But the company’s focus has switched to Greater London and within the M25 motorway. “Oddly enough we are seeing a great deal of fresh opportunities with stock coming onto the market. Some of these are being offered for sale at as low as £376.60 a sq.m. which is 40% below that of two or three years ago.” He expects banks to increase the sale of properties which they hold from bad debts but notes that “investors are polarised on prime property.” One interesting aspect of investor demand is the increase from Spain and Greece “looking for a safe haven.”
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Green light in Brighton
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| Most towns in the south east are struggling to keep regeneration moving ahead but in Brighton plans for a mixed use scheme at the railway station have progressed. The city council’s planning committee has given the green light to the scheme of Square Bay Properties for a hotel, offices and homes on a site known as ‘Block J.’ This is part of a programme to make access to the station easier and will, for example, bring an extension of the ‘Greenway’ route of a traffic free cycle and pedestrian link between the station and New England Road. The scheme for a 94 bedroom hotel, 147 homes and offices is described as low carbon which includes rooftop allotments. There will also be a new public square. This development is the last of the so called New England Quarter to receive planning permission. The former railway goods yard has been developed in stages since a master plan was accepted in 2003.
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New JV buys in Tonbridge
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| One financial organisation that has been taking advantage of the decline of the property market is Palmer Capital. It continues to follow its route into joint ventures in different parts of the UK, mainly through funding successful developers who understand their local market. The new £25 million joint venture is, however, with a financial organisation. Fleming Financial Services is a UK financial adviser with a high net worth international client base, with a particular focus on Africa and the Far East. The fund has completed its first deal in acquiring a Sainsbury store in Tonbridge, Kent where the deal was struck at a yield of 5.25%. The JV will concentrate on properties in the price range of £1 million to £10 million.
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Rebuilding Bromley
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| Bromley has joined nearby Croydon in ambitious plans for town centre regeneration. The Bromley master plan names 12 opportunity areas for offices, hotels, housing and, in particular, shops, in a £1 billion plan that will need private developer involvement. Among the sites is one west of the High Street that could have 19,974 sq.metres (215,000 sq.ft.) of shopping and 1,180 residential units. Included in the proposals is a major extension of the Glades Shopping Centre. Two sites have already gone to developers; Land Group will turn the town hall into a 150 bedroom hotel and Cathedral Group will embark on a £300 million scheme in Westmoreland Road. In the case of Croydon, the master plan for the key site between George Street to the north and the High Street to the west, in the heart of the metropolitan centre, has been up for public consultation in September and October. The area has some impressive buildings, such as the art deco Gas Board property and also the headquarters of Nestle UK, but it suffers from a poor quality public realm and the legacy of the 1960s St George’s Walk Shopping Precinct. Bromley based Jeff East of Acorn has already put together a deal for a Travelodge in the town, one of four in the immediate area, the others being in Sidcup, Bexleyheath, and East Grinstead (which will have a Wilkinson store as part of the scheme). “Generally speaking the lettings we have transacted have been small. The investment activity has been from private buyers, such as the portfolio of 11 freeholds we sold, three of them let to Swintons,“ East said. He noted that business had become harder in the past two months “but we have had a good year and double that of 2010.”
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Fundable deal
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| Another Sainsbury supermarket, this time in Woolwich, has also been sold recently. Woolwich Properties, advised by Lawson & Partners, sold the 3,809 sq.m. property to a private investor for £9.7 million, a yield of 5.5%. Darryl Stevenson of Lawson said: “This is a very fundable deal that allowed the investor to acquire a long dated secure income from a sought after tenant within Greater London. The price is at a discount because the building has a long leasehold with a longer rent review pattern than is normal.”
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In Brief #2
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| Mike Lewis of Michael Rogers, who covers North Kent, is sanguine about the market as being “no better or worse than it was.” He has two deals for 1,858 sq.metres (20,000 sq.ft.) in the pipeline and “we have achieved £215.20 a sq.metre (£20 a sq.ft.) at Tubs House, Sevenoaks which belies the harbingers of doom.”
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Showing the way
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| As politicians struggle with the closure of the massive Pfizer research base at Sandwich, now renamed Discovery Park, they will surely take a long look at the examples of Kent Science Park (KSP) and Kings Hill. Each of these is a model of intensive and focused management together with the benefits of long term investors, La Salle Investment Management at KSP and Liberty Property Trust at Kings Hill. The problem at Sandwich is the sheer scale of the site with 278,700 sq.m. of laboratory, storage and office space. Enterprise Zone status will help but CBRE still faces a mammoth task. In the case of KSP, the former Shell facility has been turned into a science park with a range of high technology companies in 55 acres of landscaped grounds serviced by a range of amenities such as a café and shop, gym and swimming pool together with meeting rooms and a lecture theatre. There is planning permission to expand on an adjoining site which will allow for future growth. That is the focus of Site Director, James Speck, and his experienced staff. “The expansion of Sheerness and the location of the Vestas wind turbine factory there will put pressure on the infrastructure, as will the regeneration of Sittingbourne town centre.” That will lead to upgrading of the transport and power supplies, he says, including the vital link to the M2 motorway which will become more important as Sheerness and KSP grow. That link could come from the northern relief road for Sittingbourne. Speck says simply: “The future is bright. Never forget that we have some big businesses in this area and we are a jumping off point for continental Europe.” Another important pointer to the future is that Speck has fostered relationships with universities, including Greenwich, Imperial, University College London (UCL) and Kent. Another peg for the future plans is closer ties with France to foster cross channel business activity. Given the nature of the occupiers, such as the recently arrived Toximet, a product of the University of Greenwich, it is not surprising that KSP has an advanced broadband network. “We are looking at the idea of clustering that would link small operators and we have the facilities to foster that, including speculatively built laboratories to suit individual needs,” said Speck. His success shows with the steady rise of the occupancy rate which is 77% now and will reach 82% by the year’s end.
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In Brief #3
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| At the flagship Kings Hill, another property, 6 Alexander Grove, which is 1,821 sq.metres (19,593 sq.ft.), has been refurbished. Liberty Property Trust’s Caroline Binns said: “We are attracting new occupiers and renewing with existing clients. Construction on the new Waitrose store is nearly finished.”
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Branson
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| The three counties present something of a mixed picture with indications of a small reverse of the improvement shown in 2010 and into the early part of the year. It is more of a mood swing than anything as uncertainty takes hold because of a shortage of bank lending and the poor economic performance. Yet some agents are doing well, although having to really fight for the business. The mood in the key business parks is positive with continued expansion and plans for the future at Kings Hill and Kent Science Park. There is also the optimism and reality from developers such as Chris Boulter of Cantium. For the cognoscenti of the commercial property market the new joint venture of Palmer Capital and Fleming is an indicator for the future. Fleming has plenty of foreign investors’ cash and Palmer has experience and expertise. Indeed it is worth following the moves Ray Palmer of Palmer Capital makes because he is a very shrewd property professional. One of the real challenges next year will be what happens at Pfizer’s Sandwich complex which has world class research facilities. It is being handled by CB Richard Ellis and the question is whether alternative research organisations can be attracted in or whether a long term investor is prepared to follow the policies espoused by LaSalle Investment at Kent Science Park. This has political ramifications for the government and its policies of encouraging high technology business.
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