A lot has been made of the UK’s vote to leave the European Union and the impact it would have and has had, on thecommercial property market. Indeed in the immediate days and weeks after the referendum decision, property funds took a hit as many overseas investors looked to withdraw.
The result of this saw several major investment funds, including Aviva, Aberdeen and M&G, freeze commercial property specific funds, preventing a ‘run’ before they were able to realise funds from their assets. The concern for investors being that a weaker economy and businesses looking to relocate outside of the UK, creates less demand for property, which in turn affects values.
So with these concerns in mind, why have these investment funds, largely now returned to ‘business as normal. The answer is simple; the dynamics of the commercial property market generally remain the same as they did, prior to the Brexit vote. There is a steadily increasing demand from occupiers, combined with a lack of good quality stock available in all sectors. The Bank of England has also made it clear they will stimulate the economy during any period of uncertainty and have proved this already by adjusting interest rates to 0.25%, to positive effect for investors.
How has this applied to Northamptonshire and our wider regional market. Initially some investors showed concern and a handful of deals we were involved with either fell through, or the price was reduced at a late stage in the transaction. As we have all paused for breath however and things have steadied, a number of investors that pulled out of deals are now re-engaging and the prices being agreed and yields being applied, have not dramatically changed. Providing the product and location is sound, interest remains. Recent evidence of this can be seen at both Grafton Trade Park, Northampton and Baron Avenue, Kettering, where we have advised a major UK property investor in their purchase of the respective 85,000 sq ft and 68,000 sq ft trade counter schemes. Both of these deals were agreed prior to the EU referendum and progressed through to completion after the vote.
The occupational market, which is what should drive investment, has shown little change and has continued to show steady growth. At Sanders Business Centre in Rushden, we have recently completed the sale of 26,500 sq ft to a growing owner occupier. In the wider region we have agreed two 30,000 sq ft plus lettings in Rugby and Daventry, in both cases terms were agreed prior to the Brexit vote and completion was achieved as planned, several weeks after the referendum. In the Northampton office market, several deals have recently been finalised at Rushmills and The Lakes, with Tollers, Howes Percival and Haines Watts all taking space.
We have also seen development continue at a pace around the county. In Northampton town centre Project Angel, the new County Council’s new HQ remains scheduled for completion in early 2017, Kier have agreed terms to kick off their new office development at Four Waterside and the new University of Northampton Waterside campus is on track for September 2018. In the ‘big box’ industrial market, there also continues to be strong development. At a recent Prologis launch event we attended, they confirmed that they are on site at Pineham, constructing a new 150,000 sq ft extension for BMW and are also under offer on their new spec built 115,000 sq ft warehouse at Apex Park, Daventry. A smaller scheme we are involved with at Woodford Halse, has this week achieved a 30,000 sq ft prelet and another 30,000 sq ft is being speculatively developed.
We cannot predict the future and there will naturally be some uncertain times ahead, as the exit from Europe is negotiated. The commercial property market however, would appear to remain an attractive asset for long term investors and occupiers and we look forward to the Autumn, when the market traditionally kicks on.
Tom Drake, Partner, Drake Commercial – September 2016.