The Garnett household bought its first Christmas Gift of the year this weekend and although this shows my wife’s extreme efficiency surrounding gift buying, it also sharply draws attention to the fact that we are quickly heading to the end of the third quarter of 2014. A small tear might be shed as we say goodbye to summer, but it is a good time to reflect on 2014. What are the likely conclusions to the commercial property sector for 2014?
Well the commercial property market certainly has seen an improvement in activity during 2014, both in terms of numbers of enquiries, transactions and a moderate strengthening in values. That said it is easy to overplay this sentiment bearing in mind the very low base the markets had fallen to since 2007/8. Only moderate improvements have been seen since.
There was a very strong start to the year for the office sector in Liverpool, with total take-up for the first half of the year reaching c260,000 sq ft, up c35% over the long-term average. This was due to one of the largest transactions seen in Liverpool as the City Council purchased the Cunard Building, partly for their own occupation. Other large deals included Mercer committing to take 22,395 sq. ft. at No. 4 St Paul’s Square in April and solicitors WP Thompson, relocated to No. 1 Mann Island. Total take up for the year should be similar to the average annual take-up since 2008. The most encouraging signs however are that the higher end grade A offices are beginning to let.
Despite a relatively strong year for office lettings, available supply still totals almost 2.19m sq. ft. The majority of this availability (c80%) is made up of older second hand stock. Following permitted development rights that came into force in 2013, conversion of existing City Centre stock has continued apace during 2014.
Liverpool cannot compete in terms of commercial occupiers compared to activity seen in Manchester but it is rapidly rebranding itself as a “leisure” destination. A number of office conversions have taken place including hotels, residential and more often than not conversion to student accommodation. We anticipate this will continue apace for some time to come, despite concerns over locations and the general over supply within this sector.
The retail sector in Merseyside is on par with the wider region. Prime locations such as Liverpool One show strong rents whilst secondary stock in small town locations struggle to attract interest and substantial discounts are often required to achieve deals.
The industrial sector is more active. Large distribution sheds are in short supply and owner occupiers within the smaller size ranges are more active. We have experienced a growth in value within the sub 3000 sq ft sector reflecting increased demand versus limited supply of stock. However occupiers still seek value and we do not foresee much new build coming out of the ground over the next 12 months. Therefore we will see an increase in value on smaller secondary stock as supply tightens further.
In summary it is clear that activity is increased, companies are able to make business decisions with more confidence and number of transactions have increased. However it is clear in all sectors, whether leasing or buying the market is value led and overly ambitious prices will not be considered.
