Following a very positive first quarter this year the commercial property market in the Black Country and Worcestershire is still holding up, we have placed a number of properties under offer and have done so in the wake of competition and a series of “final and best bids” for properties, especially well priced freeholds and leases in good locations. This is spread across both the commercial and retail markets.
In Stourbridge Town Centre we have agreed a letting of an entire property at 50-51 High Street on behalf of private clients, the former Murrays Chemist property is now all let subject to contract. This is on the heels of a major new refurbishment and fit out of the former Dorothy Perkins unit at the entrance to the Ryemarket which has now opened as “Coffee No 1” adding another facility to our town for visitors, shoppers and workers. The High Street does seem to be much busier and we are experiencing a higher level of enquiries for both retail shops and mixed investments within the town centre.
After some months of slow activity deals are now getting across the line, welcomed by our clients and landlords alike. The issue still facing us however is the continued lack of stock of both commercial properties and land. Is it time to consider the future of your properties, are you making the best use or is there opportunity to increase the value or look at disposal or letting?
Our recently opened Kidderminster office has also witnessed a solid resurgence in activity and the level of enquires is up but again a lack of good quality product is available.
A more subdued UK institutional property investment market is leading to increased opportunities for property companies and private investors to take advantage of the strong rates of return offered by UK real estate, according to the latest market outlook reports.
A slowdown in activity, as a result of forthcoming EU Referendum and “Brexit”, especially among those institutional investors, has increased the flow of potential deals to private investors and property companies.
This trend should continue continue for at least the next six months, as a result of the EU Referendum and possibility of a Brexit. No matter what the result is, we expect the current lower levels of institutional activity to remain at least until September at the end of the holiday period.
This has led to an increased number of deal opportunities crossing our client’s desks, where the appetite to do deals remains largely undiminished based on the underlying strength of commercial property returns as an investment class. However, there is a restricted level of supply of new stock being brought to the market, which is being further influenced by changes to SDLT (Stamp Duty Land Tax) on Commercial Property, which has increased selling costs for properties over £1.05 million.”
Total returns (all property) for the 12 months for the first quarter of the year stood at 13.4% with capital value growth accounting for 7.9%. This compares to returns on equities (-7.3%) and gilts (6.8%).
Commercial property returns in 2016, which are widely forecast to fall over the next 12 months but still remain above 6%, are expected to be driven by rental value growth, rather than by yield compression. So professionally advised acquisition and active asset management will become even more important for property owners this year.
We are now undertaking a number of exercises with clients to assess their commercial property assets and land holdings and to set a planned strategy for growth or disposal, especially freehold office and commercial properties. We are also carrying out as greater number of full development viability appraisals on new development, across the sectors of leisure, offices, industrial and residential. We have had a successful run on planning consents too following the recent unanimous approval on the proposed new 400 berth Marina and holiday apartment development on the River Severn at Stourport.
So despite the worry and anxiety over next month’s referendum and the uncertainty and in or out vote gives us there is still good underlying activity. Who knows what it would be like if we actually leave the EU.