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2023 saw the commercial market witness a period of stagnation due to a significant uplift in interest rates and inflation. The office and retail sector were most affected.
It is thought that interest rates have now peaked, and there are obvious signs that the rate of inflation is falling as we enter the second quarter of 2024. This in turn has had an impact on the commercial market. We have witnessed an uplift in office enquiries with more businesses demanding a more consistent office attendance, rather than home working.
The retail sector is still experiencing challenging market conditions, with short-term lettings being favoured by tenants, who want the comfort of knowing that if trading does not go as hoped, they are not committed to long-term contracts.
The industrial and warehouse market is still seeing a proficient level of demand. Pre-pandemic, High Street retailers were the dominant occupier of warehouse space. Now, the largest increase in occupation is by online retailers, who have increased their footprint from 8 million sq ft to 69 million sq ft nationally, a rise of 813%.
The supply of new units is very limited, and the development pipeline will remain restricted, given the constraints on construction and labour costs. This is beneficial for the owners of any existing high-quality buildings.
Competition amongst occupiers for existing and new build commercial units has helped maintain upward pressure on rental values. There are expectations of a further rental growth in the year ahead, as reported in the RICS UK Commercial Property Survey.
For more information or to find out how our Commercial department can help you, please contact Milena.
Do you have redundant farm buildings that your machinery no longer fits into or are surplus to requirements?
Have you considered a change of use to diversify the building into a commercial unit?
Commercial property comes in a variety of forms including offices, retail, industrial and storage units to name a few. It is worth considering what alterations and services are needed in respect of each of the uses and the impact that this will have on your existing farm.
Additional income
By adding a commercial enterprise to your business, you bring in an additional income stream that will help spread risk.
Possible investment required
When thinking about the type of diversification, you also need to consider the amount of investment needed. Each type of commercial property requires different levels of conversion.
Retaining the asset
When considering commercial diversification compared to residential use, the lower cost of conversion often means you can retain the premises and rent them out so you retain control and produce an income.
Use class order change
In September 2020, there were amendments to the Town and Country Planning (Use Classes) Order 1987. If considering diversification, it would be beneficial to review these changes and to check which use class would be required. Please see our planning article here.
Increased tenant demand in the industrial and storage sector
There has been a noticeable increase in demand from tenants looking for space from which to run their e-commerce business. This grew even further as a result of the coronavirus pandemic.
Larger, more urban developments are being occupied by national companies and this has resulted in smaller companies, who are desperately searching for space, considering relocating to rural locations.
New life to old buildings
Modern machinery can often be too large for older agricultural sheds and by converting these former agricultural properties to commercial use can give the buildings a new purpose, whilst producing an income.
The change of use also ensures that the property is maintained, preventing it from falling into a state of disrepair.
Things to consider
The possible impacts on your existing business
Current market
The area where we are seeing the largest growth is in industrial, storage and distribution. We have received good interest for all units marketed in these sectors in the last 12 months.
If you have a redundant farm building and would like to discuss the opportunity of turning it into commercial premises, please contact Tessa.
2020 was a year of uncertainty which impacted on business growth, strategy and vision for the future for many but this certainly was not felt or seen in the commercial property market.
2020 commercial market
2020 forced a number of companies to adapt and change their business model and their way of working.
Which area excelled?
One of the areas of accelerated growth has been in the E-commerce market, particularly in retailing. It is no surprise that due to COVID, this area of business is more important than ever as a huge amount of people now rely upon online shopping. This resulted in a significant uplift in demand for warehouse property, where the market was already robust prior to the pandemic.
What were enquiry levels like?
There was no period throughout the whole of last year where we saw a decline in enquiries for industrial or warehouse properties.
What are tenants looking for?
Enquiries were particularly strong for units located in rural areas away from built up urban environments. Potential tenants are drawn to units located on existing farms because they like the accessibility, good parking ratio, range of unit sizes, on-site security, and flexibility, that can usually be offered, allied to location.
What is key?
Unit size is key. The majority of tenants are looking for smaller units up to 3,000 sq ft.
Established urban industrial and warehouse units tend to be larger and, in addition to higher base rents and business rates, they can also attract service charge contributions.
Robinson & Hall commercial lettings
During 2020, Robinson & Hall’s commercial department let a range of industrial and warehouse units across Buckinghamshire, Bedfordshire, Cambridgeshire and Hertfordshire.
In particular, we let two developments of newly converted farm buildings for commercial purposes. These were both in the close vicinity of Milton Keynes and Cambridge and were highly popular, letting very quickly with a good range of enquiries to select from. The units were of a range of sizes up to 3,000 sq ft and the demand outweighed the supply at both locations.
2021…
Moving into 2021, we have seen the demand and number of enquiries continue to grow.
Please contact the commercial property team to organise a no obligation, free market appraisal on 01234 351000 or email tms@robinsonandhall.co.uk
