by Mark A Clancy, FRICS
2020 will be a year of increasing confidence and positivity across the commercial property market of the M3 and Solent corridors, as investors and occupiers align themselves to the economic and political direction of travel set by last year’s election.
However, some uncertainty will remain, not least as regards the outcome of the Brexit trade negotiations, the global economic backdrop and the future of the retail sector. In addition, the optimistic talk needs to convert to action and clear signs of increased take up and investment. In our region, this would build upon an already impressive level of transactions agreed last year, which once again was led by the industrial/warehouse sector, as illustrated by the letting of 342,000 sq ft Centric 341 at Andover to West Coast Holdings and St. Modwen developing two 11 acre industrial schemes in Basingstoke and Poole.
Total commercial property returns will improve over the next twelve months, but tempered by the re-structuring of retail as it continues its battle with on-line and the need to re-purpose surplus space. Warehouse/industrial and Grade A Town Centre offices are likely to be the best performers with the Senior Living sector topping “alternative investment” opportunities.
Investment volumes will increase in our region with overseas investors and property companies driving demand as Local Authorities in particular come under increased scrutiny over the quality and location of potential acquisitions.
Industrial and warehouse leasing in our region increased to approximately 2 million sq ft last year and the current pipeline and occupier demand should underpin a similar level of activity in 2020, with “last mile” logistics companies leading the charge for space. Rents will continue to increase from the current levels of £12.00 per sq ft for Grade A space in the upper M3 corridor and £10.25 per sq ft in Southampton.
The recent activity in the office market will be sustained together with increased demand for managed and serviced office accommodation offering flexible work space. Headline rents will move on from £21 per sq ft in Southampton and £27 per sq ft in the north of the M3.
The retail property sector will continue to address the well documented significant challenges, as traditional and long- standing formats are converted to more contemporary mixed use schemes providing alongside retail, residential, leisure, food and beverage and community uses. Rental levels in most of our Centres have already adjusted to the current trading environment and there is unlikely to be any significant movement to those levels during 2020.
In summary, 2020 offers optimism in overall terms for the commercial property market in the M3 and Solent corridors, with both occupiers and investors now being able to frame their property decisions around some level of certainty rather than the stifling deadlock of the last three years. There remain potential obstacles that may need to be addressed, but generally market conditions in our region are set to show growth and buoyancy over the next twelve months.