HELLIER Henry Adams

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South Coast Central Commercial Property News - Monday, November 30, 2020

Issue #42

WEATHERED the storm

South Coast Central News

Perhaps it is the sea air, but there is plenty of confidence in the commercial property and economic outlook along the south coast Led by the logistics industry, industrial property is the mainstay of a solidly performing market across the region and particularly around the ports of Southampton and Portsmouth.

The clear cut impetus here is the expansion of online purchasing by consumers and the need to have distribution space close to urban centres as well as efficient transport links. However the good performance is not confined to industrial but also extends to offices where there has been movement through relocation and upgrading to superior space.

What is also helping is the strength of the residential market where activity has been, surprisingly, buoyant on the south and broadly throughout the UK.

A helping hand for the economy has been extended by the Chancellor of the Exchequer through various grants. On the other hand there is an underlying concern in the ports, notably Southampton, about the impact of a no or poor Brexit deal.

To some extent there is a real contrast between the market experience in the south coast and many other parts of the UK.

For example a website, FreeOfficeFinder.com, finds that private office space and co-working prices in ten UK cities have fallen during the Covid crisis.

Nick Riesel of the website commented: “It is not surprising to see prices fall given that office workers have been advised to work from home although some locations have fared better than others”.

For its part, Cushman & Wakefield predict significant growth in managed workspace arguing that it could offer the answer to many UK occupiers facing an uncertain future by providing multi faceted, flexible solutions to their safe return to the office. It also predicts that demand for non core locations could increase as occupiers seek alternative locations in commuter towns.

Whether the current mood in markets will change as normality returns is a hot topic. At the moment Jonathan Ratcliffe of Offices.co.uk said: “I wouldn’t say people are deserting cities, but what we are seeing is a clear short term spike in interest in office sites with car parking and smaller private office suites. It will be interesting to see if this continues into the medium term”.

Such a trend could be an advantage in an area like the south coast with its myriad of attractive small and medium sized towns as well as the reality of a well spread out place like Southampton.

While highlighting the buoyancy of the industrial market, Adrian Whitfield of Realest points to the dangers inherent in the impending Brexit outcome. “What concerns me is that although companies are gearing for Brexit, the government will not handle it well. The imposition of posible customs controls will hit supply chains through the slowdown which is worrying port operators at the moment”.

One hopeful sign for Southampton, perhaps, is that cruise companies are gearing up to restart operations, an activity which had become of growing importance to the port before Covid struck and also of great influence to the local economy through employment and lettings of office and industrial space.

With regard industrial there is a “shortage of new development with only three warehouses of 9,293 sq.metres (100,000 sq.ft.) or more available in the region”.

Looking ahead, Whitfield does not anticipate any major change to the current market pattern.

Another way of measuring the industrial market is provided by Colliers’ International figures for the third quarter which reveals a record year of activity with total UK lettings of 3.14 million sq.metres (33.8 million sq.ft.) in the nine months which was 10.7% ahead of the whole of 2019. The shortage of space leads Colliers International to predict rental growth this year of 1.8% in the south east.

Len Rosso of Colliers International said: “Occupiers are faced with a conundrum where a less favourable macroeconomic environment is accompanied by a strong upsurge in consumer appetite for fast online deliveries.

Not only that, consumer preference for a greater product variety is met by unpredictability around inventory planning and this unfolding in a very low supply situation across the UK regions”.

InBrief #1

South Coast Central News

According to an analysis by the Office for National Statistics in the early period of the Covid outbreak real estate was one of the least affected activities with a marginal 0.1% decline while, for comparison, accommodation and food service fell 32.1%.

TAKING THE Pulse

South Coast Central News

What the region has showed during this crisis year is that it is blessed with a high degree of resilience.

From a national point of view this is encouraging for a future bounce in the economy when the pandemic has been overcome.

Resilience is a theme that runs through Lambert Smith Hamptonís latest Pulse industrial market report.

Dan Rawlings of LSH said: “While, earlier in the year, you might have heard of the mega box deals in the Midlands and north, up to June on the south coast we have not seen availability increase dramatically due to business failures, in fact there is more development on the way, which will help satisfy demand in a market where we are seeing a low level of supply”.

The report indicates that “occupier confidence remained remarkably resilient with deals continuing to go through and certain sectors experiencing growth, mainly within the e-commerce, parcel courier and manufacturing industries”.

LSH suggests, as a result of the pandemic, we might see more regional distribution hubs and perhaps more manufacturing coming to British shores to ease concerns on the supply chain which has been stretched.

The scale of the resilience can be measured by the fact that take up for the third quarter which was 461,863 sq.ft. of transacted industrial space, an increase of 77% on the previous quarter. However, in terms of prime industrial property, which accounted for 233,468 sq.ft. there was nearly a 50% increase in take up on the same time last year.

One area singled out in the LSH report for rental and capital value growth is Bournemouth and Poole, partly through new developments such as Magna Park, Fleets Corner and St Modwen Park.

Rawlings also notes the importance of new developments on the M27 corridor notably Kier’s Logistics City, Whiteley scheme and refurbished stock coming back onto the market such as the Railway Triangle & Blueprint Industrial Park both in Portsmouth and Reliant at Chandlers Ford.

To this he added new schemes at Totton Business Park and Concorde Park, Segensworth.

His conclusion is:  Lease terms are consistent to Pre Covid 19 levels;  Availability remains low and major developments are on the way;  Healthy levels of enquiries and an active leasehold market.

A similarly optimistic view comes from Matt Poplett of Hellier Langston who said: “The industrial market is back to pre Covid levels with rents holding up and no real downturn, which may be a surprise given the extent of the pandemic”.

RUN OF LETTINGS AT Adanac North

South Coast Central News

A wide range of companies, including Olympic climbing wall operator Parthian Climbing, Hampshire and Isle of Wight Air Ambulance, Marineguard Systems, Swiss postal company Asendia, Rivus Fleet Solutions, Star International and CIMC, a global trailer manufacturer and distributor have recently taken space at Oceanic Estates’ Adanac North in Southampton. Andrew Archibald of Keygrove commented; “Phase 1 of the development has been hugely successful with 16 of the 18 units under offer, exchanged or pre let during construction, representing over 90% of the available space within the total scheme. There are only 2 units remaining. It is a tremendous feather in the cap for Oceanic Estates who have pushed ahead fast with this development despite the 2020 headwinds”.

Keygrove and LSH are agents on the scheme.

Changing PLANS

South Coast Central News

Oddly enough at a time when elected mayors, notably in the north, have shown their independence the government has issued a white paper on planning which shifts the balance to centralised control.

Planning experts have categorised the plan, called “Planning for the Future”, the biggest shift away from localism in a generation.

Under the proposed system, local plans would not set planning policy because it would be undertaken by central government.

Land would be divided into three categories:  Growth areas where the plan grants outline planning permission for the allocated sites;  Renewal areas. In this case these areas would benefit from a strong presumption in favour of development;  Protected areas which would operate in a similar way to the existing system.

The proposal for developer contributions is a move to a development land tax to fund infrastructure and affordable housing.

InBrief #2

South Coast Central News

Nella Pang, formally Head of Business & Development at JLL has launched her own commercial company, Omega RE, which will provide advice to help companies deal with all aspects of commercial real estate.

Poole REGENERATES

South Coast Central News

When we see the word regeneration appear for a scheme in the UK, then we know that there is sufficient confidence in the market involved.

That appears to be the case for a regeneration scheme for Fisherman’s Dock, Poole at a time when the virus has accelerated its activities.

The developer MHA has submitted a planning application for the dock, which is adjacent to the marina in the heart of Poole.

This is a key vantage point along the historic quay. MHA’s plan is a mixed use development with 228 apartments, a 118 bed boutique hotel and commercial space.

The residential space is in four buildings while the commercial space offers scope for a variety of uses, including leisure and retail aimed at Poole’s increasing tourist trade.

The decision to go for planning followed an extensive public consultation.

Hossein Abedinzadeh of MHA commented: “The project is inspired by the rich history of the site and not only will Fishermen’s Dock regenerate this part of Poole, it will also give back to the local community through new homes and employment opportunities”.

MHA is headquartered in London and operates throughout the UK with offices in Birmingham and Brighton.

Another nearby site is also in line for redevelopment, at the Boyland Joinery in Stony Lane, Christchurch where Penton Motors is building four units. It will be known as Penton Business Park.

This is a new direction for the long established Wilson family business with its locations in Christchurch, Poole, Andover and Salisbury. The new scheme is a total of 1,885 sq.metres (20,300 sq.ft.) of trade counter, light industrial and storage. So far over half the space has been let.

Penton Group Managing Director Robert Wilson said: “This new scheme demonstrates our confidence in the commercial property sector and the Christchurch area and is a boost to the local economy through the generation of a disused brownfield site”.

One interesting point about the project is that a fellow Christchurch firm, REIDsteel, has designed and manufactured the steel frames, cladding, decking, glazing and doors for it. Its Simon Boyd said: “Penton has created a high quality development which will bring significant jobs and economic benefits for the area”.

Magna PARK

South Coast Central News

Work has started on Magna Park, Poole, with the construction of the estate road, the levelling of the sites with provided services so building can begin.

The business park, which has outline planning consent for up to 170,000 sq.ft. of industrial and warehouse units, represents one of the area’s biggest development sites totalling 10.7 acres and is available for immediate development. The site represents a significant milestone as it is the first new employment location to have been released for development within the Bournemouth/Poole conurbation for many years.

The new industrial/distribution space will utilise state of the art technologies providing green energy generated through solar panels and the recycling of rainwater as well as boasting a number of electric car charging points.

Lambert Smith Hampton & Cowling & West are joint agents for the Magna Park scheme.

Howell Commercial represented the client W H White.

Dan Rawlings of Lambert Smith Hampton said: “Despite the impact of the COVID-19 pandemic, there continues to be a shortage of industrial/distribution units in the area and in particular, those of a larger, modern variety. A number of local businesses have already shown significant interest in the site, part of which is now under offer”.

FUNDING Dorset

South Coast Central News

One of the most active of the Local Enterprise Partnerships is the one based in Dorset.

It has put funds into a variety of activities, such as £2.18 million towards the creation of a new histopathology hub in the country.

The money has gone to Bournemouth and Christchurch Hospitals NHS Foundation Trust.

Another of its investments is £1.5 million in the government’s Local Growth Fund (together with £3.1 million from the Ministry of Defence and £1.1 million from Dorset Council) towards the construction of a new defence innovation centre at Dorset Innovation Park, Wool. This will provide a total of 1,500 sq.metres (16,140 sq.ft.) of offices and workshop space.

Dorset LEP has also launched a £50,000 Crowdfunding Dorset Business initiative, half of which has already been allocated to small businesses.

InBrief #3

South Coast Central News

In the current market Goadsby has found that small units at Hedge End Business Centre have proved to be popular. Michael Lord of Goadsby said: “These units have proved popular for the past few years and provide the ideal accommodation for businesses taking the next step up after working from home or moving to their own self contained space from serviced offices. They are particularly popular with tenants who live locally and want to spend less time on commute times”.

SHORT TERM problem

South Coast Central News

The onlyway to look at themarket situation in the region is to measure it as a short termsituation.

A region blessed with so many natural advantages, whether it be the many harbours or the South Downs, is not going to suffer for long.

Thus new development is occurring.

For example, Hellier Langston has been appointed joint agent with Lambert Smith Hampton on two of ABP’s major commercial sites in Southampton at Marchwood Industrial Park and Eling Wharf.

Both are situated near Southampton Water and are close to the docks and city centre and zoned for industrial use.

Matthew Poplett of Hellier Langston commented: “Both sites are among only a few open storage sites outside the docks, but still close proximity to them. There are no out of hours use restrictions and both have excellent access to the motorway network”.

Marchwood is the larger of the two sites at 120 acres with open storage land, warehouses of various sizes, a range of office suites and design and build development.

Among its occupiers is Brockenhurst College. Eling Wharf is 48 acres.

Hellier Langston and LSH have also recently been acting together in the lettings at the Boyatt Wood Industrial Estate. Unit 7 was let to Howdens in January, Unit 5&6 let to Pensworth, a daily food service specialist, in August and finally Unit 9 let to Healthcare at Home in September. In total 45,000 sq.ft.

was let at an achieved rent of £10.25 sq.ft. which is a record headline rent for secondhand refurbished space in Eastleigh.

Such a location is ideal for occupiers on the site because of the closeness to the M3 Motorway.

Indeed Pensworth is an example of a company that has gained from the changes in consumer habits.

It started with 6 employees and 4 distribution routes in Wiltshire and now has 300 staff in depots across the country suppling 6,000 clientswith an extensive range of food products.

Poplett said: “The refurbishment and the secure yard meant it was one of the best available in Eastleigh and we now have only two units remaining there after recent lettings of Pensworth and Healthcare at Home”.

Freehold DEMAND

South Coast Central News

Hopefully the regional economy has a sufficient head of steam to counter the latest lockdown, as much as through the strength of the industrial market as anything.

There is another factor cited by Nik Cox of Vail Williams, which is investor and owner occupier demand for freehold properties. He said: “There is a very strong market here that is bringing good prices, notably in the sub 25,000 sq.ft. sector although there is also demand for larger units as well”.

At the moment the momentum is being maintained with a “good level of viewings for all sizes of industrial property with new schemes doing particularly well and rents notching up”.

While Cox notes the reasonable performance of the office market in Southampton city centre and Chandlers Ford because, in many cases, of relocations, Lakeside is a particularly successful story. “We have found that once the novelty of working from home wears thin, people are keen to return to the office”.

Cox said: “Lakeside has got everything, amenities on site, quality space and good communications. “

Shipping COMPANY DOCKS

South Coast Central News

NMT Shipping, a global Dutch roll on/roll off shipping & logistics company, has signed a ten year lease for 4,494 sq.ft. of office space on the first floor of RO Group’s 5 Waterside Place.

This agreement comes off the back of a refurbishment of the building, which forms part of Southampton’s Town Quay development. Emma Lockey of CBRE, who led the transaction, commented; “The refurbished open plan floor plate of 5 Waterside Place, along with the water views and parking, is what attracted NMT Shipping to the site”. There only remains 4,184 sq.ft. of available office space on the ground floor of the building.

DEALS IN Lymington

South Coast Central News

Proof of the continued strength of demand comes with the lettings at Horatio Court, Gordleton Industrial Estate, Lymington.

Goadsby started marketing the three units for a private client as they were completing at the start of the lockdown and has quickly let two to Forest Edge Home Improvements and McMenemy Automotive.

That leaves one to go but this illustrates an important point for the economy; that small entrepreneurial operations are taking space and are obviously ambitious to expand in relatively rural places like this estate.

A further illustration of this is that construction activity has returned to a reasonable level and, indeed, some 15% of the tradespeople in the sector have recorded their highest client demand ever.

In fact the UK construction industry picked up speed in September, reported Powered Now, a mobile based billing, invoicing and quotation operation. Data from the economic analysis organisation PMI showed that in September construction and trade sectors jumped to an index of 56.8 (anything over 50 is growth) from 54.6 in August.

Ben Dyer of Powered Now said: “The jump of PMI in September is incredibly encouraging for the market. It just goes to show how important these sectors are when it comes to recovering from the problems of Covid”.

He notes there is an “upward trajectory in growth in UK construction, at least in the new build, renovation and maintenance operations which are operating close to capacity”.

What is encouraging is that Dyer has seen a genuine desire by consumers and tradespeople to sustain growth.

CHANGING Romsey

South Coast Central News

Whichever way you view the lockdown, the need must surely be for optimism and in the case of property that can come through new development.

So it is encouraging that Romsey has accepted the concept of a master plan for the southern part of the town centre.

Following two years of consultation, Nexus planning has finalised its master plan which has been approved by Test Valley Borough Council built round the concept of a Resilient Romsey.

At the heart of the plan is a new square and flexible community space alongside new retailing and restaurants. The plans centre on the bus station, Crosfield Hall and Broadwater Road for a plan that will take between five to 10 years to complete.

Zena Foale-Banks of Nexus commented; “The master plan focuses on future resilience and priorities Romsey’s community and businesses. It has enhanced green, grey and blue infrastructure, improved connectivity and high quality and inclusive design.

BUILDING Bridges

South Coast Central News

Kingsbridge Estates and Bridges FundManagement have acquired a 16.5 acre site in Havant, Hampshire with a view to deliver a high quality industrial and logistics development.The site comprises close to 300,000 sq.ft. of manufacturing and distribution space and a planning application will be submitted early in the new year. The site was acquired from John Wyeth & Brother Limited (a subsidiary of pharmaceutical company Pfizer) who will remain in occupation under a short term lease whilst they complete the relocation of their operations.

Kimmre and Lambert Smith Hampton represented Kingsbridge and Bridges, while CBRE represented the vendor. Chris Fry, Chief Executive of Kingsbridge Estates commented: “This is a key employment site in the region and we look forward to continuing to work with Havant Borough Council and local stakeholders to bring forward a scheme. Our plans, which will be shared shortly for public comment, will demonstrate our ambition to help meet local demand for high quality industrial and logistics space”. Among Kingsbridge’s current projects is a site at Concorde Way, Segensworth, which is currently being developed to create 10 new industrial and warehouse units due to complete this month and a site at the former Buttericks factory in Havant, where planning consent for 12 new business units has been obtained, expected completion 2021.

KINTO AT Lakeside

South Coast Central News

The latest company to be drawn to the attractions of Lakeside is Kinto, a fleet management firm, which has leased 2,044 sq.metres (22,000 sq.ft.) for ten years.

This is part of Kinto’s UK growth plan and will be a new ‘centre of excellence.’ Simon Bateman of Lakeside said: “We think beyond the office at Lakeside and offer the perfect environment for forward thinking companies. We understand the changing demands of occupiers and the focus that businesses have on delivering that critical work life balance for their employees”.

He suggested that the flexible Grade A office space provides the opportunity for growth, “as we have seen with many businesses at Lakeside who have grown together over the years”.

Russell Mogridge of letting agent Vail Williams said: “This is a further acknowledgement that Lakeside is the premier business park in the south”.

Lakeside Harbour North is a 130 acre business campus in Portsmouth.

Better space REQUIRED

South Coast Central News

One unexpected result of the pandemic has been that companies are seeking to upgrade their facilities with extra space around employees.

That is the experience of Vail Williams whose Russell Mogridge said: “We’ve seen a dramatic spike in office activity because of the new dynamics created by social distancing. To put this in perspective there would be typically one person to 75 sq.ft. in a building whereas the commercial demand is now for upwards of 150 sq.ft. per person”.

As a result, he said, and due to lack of supply, additional high quality workplaces are being sourced rapidly in Southampton and Portsmouth and along the M27 corridor.

In the immediate period after the lockdown ended, Vail Williams had lots of enquiries from companies seeking Grade A offices in Southampton city centre.

“Clients are keen to lease from the tail end of the year, bringing back staff from potentially isolated home working for a myriad of reasons”, said Mogridge.

“Businesses are telling us they would like to have their teams in the new workplaces by the end of the year, so the fourth quarter will be intense for associated supply chains, including fit out contractors and professional advisers

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