A property market trends update
John Reeves, Chairman – October 2017
Is anything certain?
What is certain with the property market is that with our rapidly changing world; new technology and some serious threats to all sectors of the economy, least of all Brexit, that nothing can be certain anymore and that what is going on is not normal and not following the usual rules.
We feel that investment cannot be categorised anymore on the old basics. Good tenants on a long lease bring security as there is no such thing as a 100% secure tenant anymore. Who would have believed tenants such as BHS or Hanjin shipping would fold?
Investment now, is concentrated on ‘quality ‘towns, where there is an alternative use and generally this tends to discount the former traditional, working class Northern towns and Cities [with exceptions] as we don’t see values/demand rising in these places at all.
At Helmsley Group our experienced property experts look at the bigger picture, as well as a trained ‘gut feel’.
Would we invest here? What do we know about the tenant? What alternative demand is there? How much is that alternative worth? Will the location improve or deteriorate? Would we want to work/live there?
These are the sort of questions we ask when making a decision on buying strategy for development and investments.
The signs we see in the market locally are conflicting, so we will look at the sectors for the property investment and development markets. This is a round up of what we are seeing and is changing all the time, yet certain trends are emerging:
Many shops are available to rent but few are for sale. In our home City of York we have never seen so many traditional prime high street properties empty.
A worrying trend, as when in the North, York suffers, so does everywhere else. That said, the good news is that demand for leisure orientated retail has never been higher in York and elsewhere.
Online shopping has hit many traditional chains and there appears to be a change in shopping habits this year, with many people forgoing buying ‘stuff’ and concentrating on experiences – going out or having a weekend away.
We have witnessed massive demand from cafes/coffee shops/bars/hotel chains and anything associated with us spending money on leisure. This includes gyms and health associated operations [not everyone’s idea of leisure!] which bodes well for cities and towns, especially those related to tourism.
There has to be a saturation point reached at some time though.
In York tourism does seem unstoppable, as it seems it is worldwide.
Demand locally is strong but concentrated solely on York city centre and we hear this is a trend in most attractive cities.
Out of town demand, due to the lack of supply in the City centre, has improved, with more requirements and viewings but few companies actually making decisions to move.
This is probably a response to the lack of central York supply and the reduction in offices out of town, as many have been converted to residential.
Rents in the city centre are rising sharply, which bodes well for development but will increase costs for occupiers.
Out of town is also recovering a little as the oversupply has been soaked up by conversions as a demand/supply equilibrium is returning to the market place.
We are hopeful that the dire rents received for out of town offices have seen their day and normality will return.
However this is not true elsewhere where there is a vast oversupply of offices out of town which may never be let and for which alternative uses will need to be found….affordable homes anyone? N.b. Helmsley Group has been nominated for awards for its pioneering office to residential conversions out of town.
Our local market is undersupplied and weak for industrial and land values are much stronger for alternative uses. However what little industrial there is around York defies logic in rental terms, with smaller units securing £10 a sq foot; more than offices out of town. It provides good returns due to the lack of suitable premises.
We are just starting a scheme of small units in Pocklington and have pre-sold over 50% before build, at figures that make offices look massively undervalued.
So demand is out there. The more traditional towns and cities with oversupply are not seeing the same rental figures or capital values.
The weight of money available for investment that’s productive and considered a safe bet is immense.
Recently, Local Authorities have also entered the fray, as they can borrow money long term at 2% and are looking to maximise the differential between borrowings and yields.
They have recently been bidding aggressively, forcing prices up.
What this means however is that yields from property are becoming very low with inexperienced investors desperate for a return on cash.
Perhaps we should sell all our prime syndicated stock and wait for a fall in the markets which certainly will come…the gamble is when?
What is certain is that supply is very limited and demand very high, with obvious pricing effects.
Of all the markets it’s possible to be certain Autumn traditionally is the time people put their surplus stock up for sale.
We will be doing a separate report but in a nutshell the York market is very strong!
CAN WE ASK YOU A FAVOUR?
We want to hear your views on your areas of experience and markets, as the more snippets of info we receive the better informed we are in making decisions regarding places to invest.
So anything you hear/know about your area either positive or negative would be useful.
You may know of people waiting to sell their property either for development or investment purposes. We pride ourselves in dong what we say and offering fair terms, either for a straight purchase or being a fair partner in a Joint Venture scenario.
Again your thoughts will assist us and possibly a friend or colleague to maximise everyone’s end values.
Please email our Compliance Officer, Candice Robertshaw at firstname.lastname@example.org
John Reeves FRICS is Chair at Helmsley Group, a forward thinking property company based in York, UK.
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