David Wells, a partner in the real estate team at law firm Hewitsons’ Northampton office, explains why he forecasts growth in the East Midlands office market for 2017
Whilst the uncertainty for the country and the region caused by Brexit is still with us, in the East Midlands office market there are signs of hope.
The under investment during the dark years following the financial crisis has created a situation that now, in times of even modest economic growth, leads Lambert Smith Hampton to talk of “a lack of supply of high quality office space” which is “now acute.” This is likely to drive an increase in rental growth for what little Grade A and Grade B+ office space there is available and be the catalyst for speculative office development. Also, due to the changes to the income tax and stamp duty land tax treatment of residential buy to let investments, smaller investors are starting to come into the commercial property market (particularly though auctions) which is likely to drive rental growth at the lower end of the office market, although perhaps more so for small retail stock.
Of course, this rosy prediction is contingent on the regional economy continuing to perform and last years’ trend in the region for office moves, triggered in 50% of cases by business expansion, continuing.
A crucial factor set to bolster economic growth in this region is the ever growing disconnect in London between salaries and the cost of accommodation. House prices in the regions are often half of those in the capital, but without the proportionate drop in salaries. Indeed, the ONS’ recent statistics show record numbers of people under 40 abandoning the capital for the regions and businesses in Northampton, Milton Keynes, Leicester, Nottingham and Derby each look set to benefit from this influx of skilled workers.
Likewise, as long as the towns and cities of the East Midlands continue to maintain their strong universities and continue to develop their cultural offering (Northampton’s investment in Delapre Abbey and the Cultural Quarter being an example), logic would dictate that the region will retain its graduates to an ever greater degree. Therefore, it seems reasonable to hope for, and expect, renewal and growth in the East Midlands office market in terms of the quality of office premises, a sustainable rise in rents and capital growth, each supported by a more vibrant regional economy.
The area is also benefitting from strong government backed support. Stephen Catchpole, the CEO of SEMLEP, has commented:“SEMLEP has been delighted with the continuing growth of business activity throughout the South East Midlands area. This confirms the underlying economic strength of the area which can only grow stronger through Government investment. In SEMLEP’s Local Growth programme and key infrastructure such as East-West Rail and the Expressway. All in all, the picture for 2017 looks extremely good for all sectors of our economy.”
Given all this, rental and capital growth seem likely for the East Midlands office market in 2017, making now a good time to invest.
For more information please contact David Wells
A version of this article was first published in East Midlands Business Link on 23 January 2017 https://www.eastmidlandsbusinesslink.co.uk/mag/2017-predictions-david-wells-hewitsons/