EARLY signs of improvement in the property market were reinforced with the release of the RICS (Royal Institution of Chartered Surveyors) Commercial Property Market quarterly report (see page 33).
EARLY signs of improvement in the property market were reinforced with the release of the RICS (Royal Institution of Chartered Surveyors) Commercial Property Market quarterly report.
However, the signs of improved confidence are predominantly focused in London and the South East and in the larger economic centres of Manchester and Leeds in the North.
In general, the fall in rent levels and incentives have levelled out.
This is not the position in the North East. Here it remains a tenant’s market and rent levels over the last quarter have fallen further, with increasing incentives to attract what demand is in the market to take space for longer periods.
While nationally increasing demand is turning toward a landlord’s market, in this region I do not think that we will see such a change until demand for space increases. We lag behind the upturn in the curve, but it has always been the case for the North East.
Buyers and tenants seeking property should continue to negotiate the best deals they can rather than ‘wait until the market improves’.
This is also important for the region.
The stronger we can make our businesses the more they can compete. Thus saving property occupancy costs (as said in this column before, such costs are second only to employment costs) will go a long way to helping that business and helping to maintain jobs.
Don’t get me wrong about the property market in the region, we do have demand for space and deals are being struck every day.
I have just bought a delightful 11,000 sq ft office building in Team Valley for EEF Ltd (formerly the Engineering Employers Federation).
I have also nearly completed the letting of an attractively renovated listed building in Jesmond Road West, just as the renovation works are completed. The industrial sector remains stable as a market and there is strong optimism that the low-carbon sector in fabrication and high added-value engineering will grow quickly with activity at North Tyneside, Sunderland and Teesside.
The retail sector is still fragile, however, particularly at the tertiary and secondary end of the market.
Meanwhile, the house builders are coming back into the market. I have just brought about two acres of land at Crawcrook to the market for sale with outline planning consent for 24 houses and sold an adjoining site for the construction of a doctors’ surgery.
However, post-recession the markets are fragile and the forecast for economic growth is that it will be a long slow grind.
Some who bought at the peak of the market now find that prices are about 30 to 40% less than they paid and as a result are not bringing property to the market. Similarly landlords and some agents are striving still to achieve historic rents that are just not sustainable.
It’s time to wake up, smell the coffee, bite the bullet and get real. We will not see those pre-credit crunch rental and sales values again for some time (if ever!) and to wait is to stagnate.
My advice is to accept the reality of the current market and to keep it moving. It’s the only chance we have to return to a stable economic environment.
Kevan Carrick is a partner at JK Property Consultants and the commercial property spokesman for RICS North East