The supply of land to the market in last quarter is down 42% compared to the first quarter of 2016, and down 38% compared to the long-term average. Demand for land remains robust – especially from investors looking for more than a ‘safe’ investment in uncertain times – and this together with a diminishing supply, may help strengthen land values
The Bank of England’s quarterly report shows a mixed picture on occupier demand for UK commercial property, with rental values increasing further for warehouses, but falling for some retail space. Investor demand growth and sales transaction volumes had continued to recover, partly reflecting increased appetite among foreign investors following the fall in the exchange rate. Conversely, some participants in the report, including us, reported that a lack of visibility around the United Kingdom’s future trading arrangements was weighing on investor appetite in the short term. Investor demand was shifting away from London towards other major UK cities, reflecting a search for yield.
Activity in the housing market had been subdued in most parts of the United Kingdom, in line with previous updates. Demand had weakened recently relative to supply, bringing the market closer to balance. House builders remained positive and continued to increase output, though some contacts indicated that they may reassess development plans if weakness in the wider market persisted.
On our immediate doorstep Birmingham market is surging with shortage of deliverable development sites in the city centre is causing a surge in land values. Forecasts suggest that by 2018 developers could be paying up to £10 million per acre for prime development sites. Values have increased by more than £5 million per acre in the past five years alone. In contrast, in 2013 developers were typically paying just £2 million per acre for prime land. We can only hope that the “spilling” effect of the strong market in and around Birmingham will see values increase further in our area where investors are now looking for better returns than they can achieve in prime locations.
According to recent research prime residential capital values in Birmingham city centre are also expected to reach pre-recession highs this year, rising from more than £350 per sq. ft. to £400 per sq. ft. – typical sales rates per sq. ft. in and around North Worcestershire and parts of the Black Country are now around £250 – £300 psf for good residential stock in good areas.
In the for sale market, there are currently around 3,500 residential units under construction and at least 6,500 in the pipeline, based on identified sites, in the city centre.
There has been a significant commercial development in Birmingham and some significant business relocations from London, such as HSBC and potentially such companies as Channel 4, along with indigenous companies growing particularly in the legal and accountancy professions. This has led to an increase in employment opportunities and the leisure offering in the city has also become much more diverse, cultured and interesting. Birmingham is cool again and will have a positive effect on our areas as well. The “Birmingham Engine” has a major part to play in the success of North Worcestershire and The Black Country. Following the Mayoral elections for the West Midlands Combined Authority our biggest neighbour it is not clear how the proximity to the “Midlands Engine” will fit into the West Midlands Combined Authority, and indeed the effect on Worcestershire and The Black Country. It is fair to say that the focusing of new investment the new positon will create together, with the needs of Birmingham, as the region’s pre-eminent creator of employment and wealth, a positive effect on other regional centres including Worcestershire and The Black Country.
Walton & Hipkiss, established in 1929 is proud of its long family history, now with offices in Stourbridge, Hagley and Kidderminster successfully selling and letting homes, commercial property and land in and around North Worcestershire, Wyre Forest and The Black Country. We are experiencing very busy activity across all markets.
In the wider area Marina Quays a mile up the River Severn from Stourport town centre has taken a major step forward with the full planning consent now granted, located off Sandy Lane and the River Severn, to the east of town centre, it is currently low grade agricultural land used for seasonal grazing.
The scheme represents an exciting opportunity for the new marina to provide leisure mooring berths within the Stourport area, for which a significant need has been identified. It will also create a new destination on the town’s Riverside walk. The scheme includes the creation of a new basin for 408 berth marina, a new footbridge across the marina entrance, 94 holiday apartments (1 and 2 bedrooms) a Club House, including a restaurant & bar, gym, boat sales & hire facility, chandlery, workshops and commercial space. Marina Quays will be supplemented by the adjacent development, now underway at Marina Point, a new serviced workshops and offices now under construction. This will make available much needed space for emerging industries, SME’s and new startup businesses and will be available this year.
It is critically important that owners, occupiers and investors of industrial and commercial properties are aware of the real values, as these can have real impacts on sales, acquisition and investment strategies, and on insurance premiums, for both re-building and business interruption.
So testing times in front of us with a level of uncertainty but please remember to take professional advice on all aspects of your commercial properties, talk to us about a free property health check and look at the future potential of your property.