Investors and developers should keep an eye on booming north

 

The commercial property sector is on the rise in the north, and investors are being urged to look to the Northern Powerhouse for higher yields.

The Northern Powerhouse Office Market Report, compiled by Lambert Smith Hampton (LSH), has revealed a record increase in office take-up this year – on-track to be 26% higher than the 10-year average.

After the first three quarters saw almost 1,000 deals made “across the north’s eight key markets”, the property consultancy claims the total for the year could reach 5.2 million square feet – 13% higher than 2016 levels.

Office letting activity is dominated by SMEs, which accounted for around 82% of the transactions, and prime headline rents increased in Leeds and Salford Quays. Elsewhere, in Manchester, Sheffield, Newcastle and Warrington, growth is expected over the next few months.

Attracting investment

Oliver du Sautoy, head of research at LSH, believes what we have seen this year will be a tough act to follow, but is optimistic for future growth.

“Healthy levels of active demand and an analysis of forthcoming lease events point to another year of above-trend activity and take-up across the region in 2018,” he said. “Investors and developers must therefore take heed of the rapidly changing dynamics within the Northern Powerhouse office markets if we are to continue to support home-grown businesses and attract greater inward investment.

“Solid asset management strategies and refurbishment of poorer quality stock will be key to securing the best occupiers and boosting returns in the coming 12-18 months.”

There is a lack of supply in the regions – total availability has shrunk by 12% since the start of this year – and this has encouraged “steep increases in rental levels for existing space in some markets”, according to the LSH report.

This could result in more opportunities for developers looking to bridge the supply and demand gap, as well as higher yields for investors.

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Investors and developers should keep an eye on booming north

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