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Kent, Surrey & Sussex Commercial Property News - Tuesday, October 1, 2019

Issue #59

Coastal RESILIENCE

Kent, Surrey & Sussex News

Oddly enough, given the furore over Brexit and the clear signs of damage to the UK economy, the commercial property market in the three counties of Kent, Surrey and Sussex appears to be resisting the pressure.

The basis for this optimism is significant town centre developments in Brighton, Lewes, Eastbourne and Worthing as well as the continued growth of Ashford.

Areas of south London on the borders of Kent are also seeing firm demand and new developments while Croydon has developed substantial new commercial and residential space. The vacancy rate is low although take up has slipped.

It would appear that the south of England stretching along the coast from Dover to Bournemouth has moved up a gear within the UK business world and been resistant to the impact of Brexit.

In the case of Worthing, which has to some extent been in the doldrums for years and has a considerable number of empty shops, the new schemes will be transformational, notably the mixed use project at Teville Gate at the railway station where HMRC is set to take a new 8.547 sq.metres (92,000 sq.ft.) office when itmoves fromDurrington.

Another town that experienced a livelier commercial market is Maidstone where there are new warehouse and industrial schemes. It could be that councils in the three counties have taken heart from the hard driving policies of Ashford Borough Council in promoting new development which has pulled in over £520 million of new investment and brought accolades for its policies from the Economist and New York Times.

This success brought a yearly rental increase of 11% for offices and 38% for industrial space in Ashford in 2018 and a 33% increase in office rents over a five year period. This was topped by Dartford at 62%; Gravesend at 54%; Sevenoaks at 50% and Canterbury at 50% while Thanet languished at 0%.

IN THE park

Kent, Surrey & Sussex News

Plans for Phases 2&3 of the North Street Quarter mixed use scheme in Lewes have been given the go ahead by the South Downs National Parks Authority.

These phases will have 178 of the scheme’s 416 homes. As well as housing, Phase 1 encompasses commercial space and a health hub.

The scheme is a joint operation of North Street Quarter Ltd and Lewes District Council. James Lacey of Vail Williams, planning advisors and joint selling agents, said: “The scheme is exciting for Lewes and will provide a fantastic mixed used development on a large brownfield site on the edge of a historic town, but also within a national park”.

Maidstone SCORES

Kent, Surrey & Sussex News

Maidstone is another favoured location for industrial development indicated by the completion of Goya Developments’ Aylesford Business Park with units ranging up to 3,839 sq.metres (41,320 sq.ft.).

Adjacent to the M20, it is part of the well established Forstal Road Industrial Estate. Andy Stothard of Goya said: “We see Maidstone as a key strategic location within Kent, which is well placed to service demand from local, national and continental European businesses”.

Another scheme in Maidstone, Chancerygate’s 5,137 sq.metres (55,296 sq.ft.) Parkwood Industrial Estate, Maidstone Exchange is already 60% let a month after it was completed.

Richard Turnill of Watson Day, who are marketing both schemes, said: “The Maidstone and Aylesford market has been crying out for some new stock for years. There was virtually no speculative development in the local market for the past 10 years, so two schemes delivered on different sides of the town within a few months of each other is really exciting”

SPECULATIVE Croydon

Kent, Surrey & Sussex News

The really big beast in the south east office market is clearly Croydon with the sort of office space to match central London.

The first half year however, saw a drop in office lettings in Croydon, though Holly Purvis of SHW expects a busier June to December with the number of larger enquiries that are in the market. Recent lettings have been mostly small such as to Explori in McKay Securities’ Corinthian House and to Dotmailer in One Croydon.

Damian Lambourn of Lambourn Commercial notes that the drop in lettings coincides with a lack of Grade A space.

He points out that Croydon has an excellent track record of letting pre or upon completion of new office developments but despite this speculative office development has been sporadic.

The largest deal in nearby Sutton was 1,115 sq.metres (12,000 sq.ft.) to the accountancy firm Mazars in CNM’s new mixed use development adjacent to the railway station. CLS’s Chancery House scheme has also done well and is close to full.

Purvis said that: “Availability in Croydon remains at an all time low and has only increased slightly to 21,367 sq.metres (230,000 sq.ft.) or 4.2% of the total market. It is similarly low in Sutton”.

Rents are firm in both Croydon and Sutton. Prime rents in Croydon are now £349.70 a sq.metre (£32.50 a sq.ft.).

After a decade or so of large scale development there are still a number of schemes ready to go. Purvis said: “The market is closely watching for news of Phase II of Schroders/Stanhope Ruskin Square scheme and plans are being worked up for Mayfair Capital’s refurbishment/extension of 28 Dingwall Road, which should commence this year”.

Will Foster of Knight Frank said: “The shortage of stock indicates that prime rents could reach £403.50 a sq.metre (£37.50 a sq.ft.)”.

Damian Lambourn said that when second hand Grade A stock comes to the market in Croydon, it lets well.

“We just need more confidence in the market and speculative development of Grade A stock offering larger floor plates”.

He points out occupiers need a reason to move and large, efficient floor plates and an enhanced working environment are the driving forces.

Until these are available, landlords need to ensure that their spaces meet occupiers’ needs in terms of design and flexibility. McKay Securities have recognised this and their Corinthian House offers both conventional offices and flexi space.

One prospective development is the Old Dairy site in West Croydon on Bensham Lane which has been sold by Croydon Health Services through Carter Jonas to Social Capital Partners.

An ideal site, it is close to West Croydon railway station and close to shops.

Olivia Cardale of Carter Jones commented: “It is a brownfield site in a quiet residential area close to the station and High Street making it a perfect locale for development (which is likely to be residential)”.

On the industrial side, Robert Bradley-Smith of Altus Group says that, due to its location equi-distant between central London and the southern M25, Croydon remains a popular location for logistics/warehouse occupiers, despite some general economic and market uncertainty. Although take up has been relatively low over the last two years, this can be attributed to a lack of new development. This imbalance has been addressed this year with one scheme being completed and two developments due to start in late 2019. Valor Park in Croydon are hoping to start demolition shortly and ProLogis Park, Beddington Lane will be on site by the end of the year. Aberdeen Standard’s 4,273 sq.metres (46,000 sq.ft.) Affinity scheme in Beddington Lane is due to complete in 2019.

Although demand for small units has dropped, requirements for midbox units from 1,858 sq.metres (20,000 sq.ft.) to 9,290 sq.metres (100,000 sq.ft.) remain steady and landlords are responding by refurbishing older stock.

NEW SPACE AT airport

Kent, Surrey & Sussex News

At the time when the operator of Brighton City Airport (also known as Shoreham Airport) has changed, planning permission has been granted for a major expansion of the commercial space at the airport.

This will give it a further 24,990 sq.metres (269,000 sq.ft.) of commercial space and is occurring at the same time as the nearby large £150 million development at New Monks Farm has been given the green light.

At New Monks Farm there will be a new IKEA store, 600 homes, a country park and community hub and land for a new primary school.

Peter Rainier of DMH Stannard said: “The new schemes at New Monks Farm and the airport are once in a generation developments that will create hundreds of new jobs, homes, leisure and lifestyle opportunities and the first IKEA store in Sussex”.

The new operator at the airport is Cyrrus, whose Rob Cooke said: “Acquiring the airport is a great opportunity to develop and improve a much-loved local operational base for private and executive flight operations, as well as developing a go-to-destination for leisure fliers, and an opportunity to add to the local and regional economy”.

In Brighton, Vail Williams is marketing two offices with close to 1,858 sq.metres (20,000 sq.ft.) for the Hargreaves Group. The larger of these is the 1,334 sq.metres (14,364 sq.ft.) space in the refurbished Queens Road Quadrant, and the other space is in 100-101 Queens Road.

Max Perkins of Vail Williams said: “The office market in the ity has been restrained by a lack of new space but office demand is strong. We’ve already experienced a lot of interest from existing businesses seeking to remain in the area, while new businesses want to locate to central Brighton”.

One successful mixed use scheme is on the former AMEX house site, which is owned by First Base in partnership with Patron Capital. It is using SHW and CF Commercial to market 3,623 sq.metres (39,000 sq.ft.) of beverage, leisure and retail units as part of the 13,935 sq.metres (150,000 sq.ft.) project.

Richard Pyne of SHW said: “This development is one of themost exciting to hit Brighton in over two decades and with somany other new developments going up, it’s a great time for companies to expand in the city”.

Jack Riley of Knight Frank pointed to the letting of the 6,039 sq.metres (65,000 sq.ft.) Brinell building six months before completion as an example of the strength of the office market. “The TMT sector is now important to the city as shown by Unity Technologies doubling in size in a four year period”. Knight expects office rents to top £376.60 as sq.metre (£35 a sq.ft.) soon.

One company moving into Brighton is Friday Media, which is leaving its 3.65 acre site Sayers Common which has a total of 3,401 sq.metres (36,610 sq.ft.) of offices and warehousing. Vail Williams is marketing it at £5.5 million.

Perkins said: “FM House is accessible off the A23 between Gatwick and Brighton, making it ideal for owner occupiers”.

£16 MILLION DEAL IN Chichester

Kent, Surrey & Sussex News

One successful location for industrial space is Chichester where Lambert Smith Hampton (LSH) have handled the sale of two warehouses totalling 12,181 sq.metres (131,124 sq.ft.), together with an 0.67 acre adjoining site, for £16 million.

The site on the Chichester Business Park has been bought by Aberdeen Standard. LSH were joint agents with Flude Commercial.

Jerry Vigus of LSH said: “With investor confidence remaining high and continued demand for industrial investment opportunities, it’s certainly good news for the south coast economy”. Chichester Business Park owner Seaward Properties will re-invest the proceeds of the sale in new developments on the park.

VISIONARY MASTERPLAN FOR Southern Gateway

Kent, Surrey & Sussex News

Henry Adams were instructed by Gateway Plus to promote their regeneration scheme for Chichester’s Southern Gateway.

Martin Trundle of Henry Adams said that the aim is to create an exemplary destination to attract a ‘New Industry’, generate significant employment opportunities and position Chichester as a ‘go to’ destination on the South Coast for progressive SMEs. At the heart of the Gateway Plus masterplan is a conference centre, an international hotel with support space, some complementary residential space aimed at young professionals working locally, cutting edge public realm and an upgraded railway hub including the removal of the rail crossings by building an underpass. It has been called The Forum Quarter.

CLOSE TO London wins

Kent, Surrey & Sussex News

Some of the strongest performances in the industrial market have come in areas such as North Kent that border the London suburbs, often catering for the demand of the logistics industry.

An example of this is the sale of a 25 acre site in Belvedere by Savills on behalf of a pension fund who have worked with the development manager Panattoni to get outline planning permission for 41,805 sq.metres (450,000 sq.ft.) of industrial space.

For its part, the pension fund has retained 5 acres which it intends to develop by 2020with 10,219 sq.metres (110,000 sq.ft.).

Lucy Winterburn of Savills said: “Proceeds from the sale will be used, in part, to fund other developments that are either in hand or planned for a variety of sites across the UK”.

Another major scheme is by Valor Real Estate Partners for a 14,214 sq.metres (153,000 sq.ft.) logistics park in Mitcham, which will have a variety of different sized buildings or, possibly, a single tenant.

Funding for the £27 million project has come from Investec whose Erin Clarke commented: “This is an opportunity for us to partner with a highly experienced logistics investor and developer that has the skills and vision to deliver this project from planning consent through to completion. The growing appeal of urban logistics is well documented as consumer habits have evolved; the rise of e-commerce and increasing demand for same day delivery makes site like this near large cities very attractive”.

In Sydenham, CBRE Global Investors has bought the Bell Green Retail Park for the West Midlands Pension Fund from Kier Group which has a range of blue chip tenants, such as Sainsbury, Halfords and Next on a 9.8 acre site.

Haywards PARK

Kent, Surrey & Sussex News

Developers Commercial Park Group has chosen Vail Williams to market the initial 6,039 sq.metres (65,000 sq.ft.) offices in its 37,160 sq.metres (400,000 sq.ft.) Haywards Park, Haywards Heath.

CPG’s John Baker said: “Most office buildings in Haywards Heath are not fit for purpose, which means that large international companies, until now, have looked elsewhere for their headquarters”.

InBrief #1

Kent, Surrey & Sussex News

Network Aviation, an aviation services provider, is moving to Sterling House, Crawley, the former home of SHW, the property agents. Network Aviation has 50 offices throughout the world and plans to extend and refurbish the property.

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