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Commercial Property News For South Coast Central - October 2011
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To view our extensive range of commercial Office and Industrial properties
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Fair wind for Weymouth
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| While many parts of the UK have experienced trying commercial property markets, the south coast has bucked the national trend with a period of improvement. That applies from Hampshire to Dorset. The major urban areas have benefited from their broadly based economies, taking in services and manufacturing, but it is noticeable how Weymouth, not noted for either of these two activities, has become more dynamic. Of course that is mainly due to it being the host for the 2012 Olympic yachting events but the hope must be that it has been given a new lease of life that will break the log jam of development. It is clearly apparent how the town now buzzes with activity, helped by a new main road. At the moment it appears that Weymouth is a star performer for the regeneration lobby. The market in the core area of Southampton and Portsmouth, (the Solent corridor) has been solid and even retailing has not been as poor as in many parts of the UK. Russell Mogridge of Hughes Ellard said: “The office level of take up in the region is above pre-recession levels at the end of the third quarter, reaching 32,515 sq.m. compared with the 10 year average of 23,225 sq.m.“ A significant part of this has been at Highcross’ new business park, Lakeside in Portsmouth. This has reached a 65% let in building 1,000 by achieving 9,290 sq.m. of lettings this year. Phase two of the development will begin soon. Among the trends noted by Mogridge are companies relocating to single floor plates to aid team performance and staff morale as well as improving their working environment. “We have seen movement in the professional service sector, such as recruitment, legal and accountancy,” he added. Nik Cox of Hughes Ellard said: “We are hoping that the out of town activity will percolate to the Southampton city centre, which has seen a limited office take up, probably reflecting the lack of Grade A space available.” Cox also noted that the manufacturing sector had been active and reflected the diverse economy from shipbuilding, defence and high tech. Jones Lang LaSalle’s Jason Webb said: “There are still significant opportunities for occupiers to obtain costs savings on the M27 but the lack of speculative office development means that the pipeline will remain severely limited and as Grade A supply reduces further, the window of opportunity for tenants is expected to close.”
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High in Eastleigh
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| Eastleigh has been one of the best performing towns in the region with all the markets benefiting from the fine transport system of the M27 and M3 motorways, fast rail connections and the airport. In the office sector, occupancy remains high, said Ben Welch of Goadsby, helped by “affordable accommodation.” Welch cites the success of Eastleigh Borough Council in disposing of their properties, such as the Black Horse Building where only a small amount of space is vacant. It is a similar picture for industrial property, typified by the council’s Shakespeare Business Centre which is almost fully occupied. Paul Ramshaw of Eastleigh Borough Council said: “The town centre continues to go from strength to strength, such as the arrival of the Cheque Centre which has brought new jobs and helped maintain the high level of high street occupancy.“
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Developing Southampton
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| Three developments in Southampton, one completed, one with planning permission and the other in the planning stage, continue the improvement to the city. Planning permission has been granted for a new 9,290 sq.metres (100,000 sq.ft.) arts complex, retail space and restaurant units in a joint venture between the council and Grosvenor. There will also be 29 flats on the site which is around the Guildhall Square. Councillor Royston Smith commented: “Another key development in the Cultural Quarter is coming to fruition. It will be a place where all the arts can thrive and draw in hundreds of thousands of visitors every year.” The second new scheme is a 155 bedroom Premier Inn at West Quay which Cllr. Smith said “is a key element of the West Quay development, which is part of the city’s renaissance plan.” The third project is a plan for Southampton’s tallest building. The residential scheme at Ocean Village with 28 storeys is being developed by Allied Develeopments.
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InBrief #1
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| What is clear in the industrial market is the mass of relatively small lettings, often to young and growing companies. For example two units have been let through Vail Williams at Wessex Gate, Horndean on behalf of Hovedean Properties. The new occupiers are DI Spark, an engineering firm which already occupies three units there, and Playhouse Industries, a provider of children’ s playground and laser quest parties. Only one unit remains at Eagle Close, Chandlers Ford after the latest letting to Total Design Shopfitting.
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MAG builds more at airport
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| MAG Developments has the determination to undertake significant development at its UK airports even if Manchester is far and away its most important facility. At Bournemouth, it has a 10 year programme and has submitted a plan for 41,991 sq.metres (452,000 sq.ft.) at its Aviation Business Park. The majority of this will be warehouse and industrial space on the 35 acre site. It is part of a phased plan to expand the capacity at the airport, where it has recently invested £45 million. David Roberts of MAG commented: “These plans provide a clear long term strategy for the business park and will complement existing stock on the estate. That will attract investment through development opportunities.” It has proved its point with Aviation Business Park where there is an occupancy of around 95% after two lettings totalling 2,320 sq.metres (24,967 sq.ft.), one of which was to Talard Thai which relocated from nearby Christchurch. The company supplies a wide range of foodstuffs and flowers from Thailand. The other letting was to the specialist aerospace interiors manufacturer, AIM Aviation. The two lettings follow a 3,279 sq.metres (35,295 sq.ft.) pre let to City Link. City Link’s Steve Jones said the relocation from a nearby property would allow the company to expand its operations in the Bournemouth area. “The demands of our customers have changed dramatically. They are very different from 10 years ago and we have to accommodate that,” Jones added. Aviation Business Park currently provides 139,350 sq.metres (1.5 million sq.ft.) of mixed use business space and is home to 140 businesses with a working population
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High for Highcross
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| Although city centre office lettings in the region are slow, the out of town business parks have really performed. Lakeside on the former IBM factory at Portsmouth has experienced a spate of lettings culminating in the Southern Co-operative taking 1,593 sq.m. The park now has 70 companies employing 4,500 people, including IBM which is still located there. Russell Mogridge of Hughes Ellard said: “The 130 acre park has attracted more than half of the lettings in the Solent corridor since January. There are a further four deals totalling 11,148 sq.m. at various stages of completion.” The business parks may be where the action is now but Southampton City Council is pushing hard to make the city centre more attractive for business. It has welcomed the plan by Arcadian Estates, part of the London & Henley Property Group, for the redevelopment of the East Street Shopping Centre. It will be demolished and a Morrisons’ food store constructed on the site in partnership with Centros. As part of the scheme, there will be new access between East Street and Evans Street. In turn that will help, said John De Stefano of London & Henley, “our nearby Capital House office building.”
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Industrials set the pace
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| The buoyancy of the industrial market has spurred investment deals, in particular in the business parks and estates around Southampton. For example, Axa Real Estate Investment Managers has sold the 4,645 sq.metres (50,000 sq.ft.) Solent Gate Industrial Estate, Fareham through Lambert Smith Hampton to Threadneedle Property Unit Trust for £3.82million, or a yield of 8.2%. Axa’s Ian Pollard commented: “The sale crystallises the value we have created and allows us to look for new investments where we can add value for our client.” In Eastleigh, Oceanic Estates has paid Craigard Eastleigh LLP £3.8 million for the 9,290 sq.metres (100,000) Avalon warehouse in Parham Drive. The warehouse is sublet to the Jamie Oliver Group and was an off-market transaction. Jerry Vigus, from Lambert Smith Hampton commented: “We have stayed close to this property, knowing that it could potentially be bought. We indicated that a quick decision had to be made and therefore approached Oceanic Estates, knowing that the business had the resources available to buy the property and move quickly. We were then able to negotiate terms and purchase the unit within 14 days of agreeing a price.”
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In Brief #2
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| The South East England Development Agency (SEEDA) has obtained planning permission through Turley Associates for the Island Business Park on the Isle of Wight. It will have a mix of offices, industrial and warehousing space. SEEDA’s Peter Cusdin said: “The business park makers an important contribution to the island’s supply of employment land and is already generating substantial interest.”
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SEGRO success
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| The steady letting of property on SEGRO’s developments in Portsmouth and the M27 corridor is a good indicator of the performance of the region’s industrial market. At the Railway Triangle earlier this year Fraser Freight took a 10,460 sq ft warehouse/ production unit to add to its existing head office and warehouse space elsewhere in the city. In May, SEGRO let a 50,000 sq.ft. production/warehouse unit at its Unit 1 Trilogy scheme, Segensworth, to Contego Packaging on a fifteen year lease. The Trilogy scheme is now fully let. SEGRO has also let a 10,667 sq.ft. industrial unit to Snows Group, a motor dealership, on a twelve year lease, at Mitchell Way, Portsmouth. On Voyager Park, SEGRO has let an 8,775 sq.ft. unit to Transas for a new training facility. The company is a developer of software, integrated solutions and hardware technologies to the marine and aviation industries. It has also let a slightly smaller unit to existing occupier, Stone Bridge Global. SEGRO has now sold or let 75% of the Explorer and Discovery phases at Voyager Park, which total 1,487 sq.metres (160,000 sq.ft.). Lambert Smith Hampton’s Adrian Whitfield highlights the strength of the south coast industrial market. He said: “With a general lack of available property, this year has seen landlords in a stronger position and in some instances it has led to the reduction in the level of incentives.” But rents remain static and while the market is tough due to the economy it is mainly a result of a lack of stock. “There are a number of requirements which could be the catalyst for a developer to build a speculative scheme. However, pre let, design and build occupier led deals are more likely,” Whitfield added. Ross Moyler from Vail Williams commented “that we have seen steady levels of industrial take up over the last 6 - 12 months which is encouraging bearing in mind the backdrop of the current economic uncertainty. We have seen a handful of larger transactions which have further reduced the available stock of bigger buildings.“
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Winchester wins
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| Old established market towns and old established cities in the UK have often avoided the worst of the economic downturn. That appears to be true of Winchester which, said Goadsby’s Annelies Culley, “is still proving to be fairly resilient.” She notes the “steady demand for city centre offices.” In particular she mentions the refurbished Athenia House, Trafalgar House and St Swithuns as being in demand. “There has been a lot of excitement regarding the proposed Silver Hill development in the city centre. The mixed use scheme will include high quality offices, retail and residential accommodation. The industrial market is still seeing a good level of enquiries for premium space.” Goadsby has also recently analysed the market in another market town, Romsey where it has seen “a positive start to 2011 with a number of office lettings.” Goadsby’s Ben Welch said: “The market town of Romsey offers an attractive working environment and good access to Winchester and Southampton.”
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InBrief #3
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| One of the largest developments in the region on a 520 acre site at Waterlooville has been granted planning permission. It means Grainger can build 2,550 homes, a local community centre and healthcare and elderly care facilities together with two schools and a nursery. This adds to the recent planning permission from the Ministry of Defence for 4,500 homes on a former military site of Aldershot Garrison which is 30 miles to the north of Waterlooville |
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Branson
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| There is a continued fascination about how various parts of the UK are handling the economic downturn. In the case of the South Coast it appears that a combination of factors has given the region something of an advantage, because how else do you explain the sturdy performance of the industrial and office markets. It must owe something to geography with major civil and naval ports that have turned out skilled works for generations and attracted high technology companies. There continues to be a high level of civic involvement in improving the town and city centres, as shown by Southampton with its new arts complex. Broadly speaking the region is where successful people like to live and work. So there is a varied and rich environment including competitive agriculture. Public sector participation is also vital and we see with Weymouth where its choice as the venue for the 2012 yachting events has transformed the fine Georgian resort. The question is whether that is a permanent change but it has certainly gained from spending on the infrastructure, notably the new road to Dorchester. Confidence is also shown by the increased volume of research from the property professionals about how the market is performing and views on the future.
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