CAMBRIDGE
BATH
VIEW RESEARCH
LEEDS
VIEW RESEARCH
BIRMINGHAM
VIEW RESEARCH
OXFORDSHIRE
VIEW RESEARCH
BRISTOL
VIEW RESEARCH
The latest Commercial research from Carter Jonas
COMMERCIAL
Scroll to explore
About
Commerical Edge
Welcome to our Commercial Edge research update, which takes stock of how our regional commercial markets fared in 2020 and the outlook as we enter the recovery phase of the COVID-19 pandemic. We look at the picture across the office, industrial and retail sectors, and assess the prospects in each of our key regional commercial locations of Bath, Birmingham, Bristol, Cambridge, Leeds, and Oxfordshire.
OFFICE
INDUSTRIAL
RETAIL
VIEW RESEARCH
OFFICE
Office take-up across our regional Commercial Edge cities in 2020 was a third below the 10-year average, and in line with the low point of 2009 following the global financial crisis. However, some locations fared reasonably well, with Bristol city centre take-up only 12% below the 10-year average, and Bath seeing a 35% increase compared with 2019.
There were some standout deals in 2020, including BT taking 283,100 sq ft at Three Snowhill in Birmingham’s largest ever office letting; engineering services firm Babcock taking 132,000 sq ft at Bristol Business Park; and software firm MathWorks taking a pre-let of 93,000 sq ft at Cambridge Science Park.
The science and technology sector, and the life sciences in particular, has remained extremely buoyant and we expect ongoing strong demand, most notably in the Oxfordshire and Cambridge markets, but across the locations.
The regional office markets are characterised by a lack of prime stock and development activity remains limited. However, in Cambridge, development has remained robust, whilst in the main Oxford science locations park owners are actively looking to bring space forward. Some speculative construction has recently completed or is under way in the other centres, including 90,000 sq ft at Bath Quays South. Birmingham has seen several schemes come forward in recent years, but available space has reduced significantly with only One Centenary Way under way, and 103 Colmore Row still available; and in Bristol, Royal London’s Distillery scheme has recently completed.
Whilst new prime supply will remain scarce, vacancy rates will inevitably rise in the second-hand market. We expect an increase in tenant-controlled ‘grey’ space as the ongoing shifts in occupier requirements mean more corporates reduce their office footprint, although only relatively modest amounts have been coming back to the market to date. In addition, second-hand landlord-controlled space is likely to come onto the market as tenants exercise break options.
Constrained supply has helped to support prime rents, which have either held steady or indeed increased over the last year, as Figure 2 illustrates. Cambridge has seen a new headline rent of £48.50 psf set by Fora at 10-20 Station Road. In Oxford city centre, a record rent was set in the letting of the Jam Factory at £46.75 psf (although this does not necessarily reflect the tone for city centre quoting rents), and there is upward rental pressure on the main parks where supply is limited. In Leeds, deals done at the Majestic scheme have taken prime rents above the £30 psf mark, and in Bristol, where grade A supply is also scarce, prime rents may see some upward pressure this year.
2021 should see greater clarity emerge over the future level and nature of office demand, following the working from home revolution of the last year. But office densities are likely to be permanently lower.
INDUSTRIAL
The key challenge for the sector is a lack of supply rather than demand, and against this backdrop we have seen strong rental and land value increases. The Carter Jonas industrial index, based on our monitoring of 49 key markets across the UK, shows that the rate of prime industrial headline rental growth accelerated in 2020. Prime rents rose by an average of 2.7% during the year, compared with 1.8% in 2019. This was well above the CPI inflation rate of 0.6%. 2021 should see further upward pressure on both rents and land values.
Occupier demand remains broad-based including manufacturing, engineering, and specialist suppliers. We are also seeing very strong demand for data centre space and self-storage. There is also strong demand for owner occupation, but again there is a lack of stock as most owners are unwilling to sell assets at present.
Key deals across our markets have included Amazon’s pre-let of nearly 2 million sq ft at Gateway 45 in Leeds’ Aire Valley Enterprise Zone, plus over 700,000 sq ft at Doncaster iPort; Great Bear Distribution taking 330,000 sq ft at Central M40, Banbury; electric vehicle maker Arrival taking 168,000 sq ft at Link 9 at Bicester; Clipper Logistics taking a 667,000 sq ft unit at Sherburn 667 near Leeds; lettings in Bristol to EDF (260,000 sq ft), Wincanton (248,000 sq ft) and Bart Ingredients (139,000 sq ft); and 100,000 sq ft let to Polar Speed at Hub 100 in Birmingham.
Occupier demand across the UK was exceptionally strong in 2020. Bristol and Leeds saw take-up well ahead of 2019, and Cambridge was in line with the 2019 level. There has been a trend towards more 1 million sq ft+ units and increased eaves heights, with Amazon taking several units in this size category. This is putting greater pressure on site availability, with limited sites of sufficient size.
RETAIL
With the retrenchment of many national retailers, independents are now seizing the opportunity to take units at more affordable rental levels. Whilst there have been some sharp falls in prime town centre retail rents, this trend has helped rental levels in some secondary locations to hold up relatively well. The array of government support has kept the level of insolvencies remarkably low, and the survival of independent businesses once support is withdrawn will be key.
Whilst rising unemployment will act as a drag on retail expenditure, the household savings ratio has risen to historically high levels during the pandemic (at approaching 30% of disposable income). There is significant potential for this to be unleashed once consumers are permitted to return to the high street
(and feel safe in doing so).
Online sales accounted for nearly a third of total sales in Q4. This figure is likely to fall back towards the 20-25% pre-COVID-19 levels once social distancing restrictions are eased, but the long-term trends will remain firmly upwards.
The shifting and unpredictable nature of social distancing restrictions has continued to hamper the physical retail sector, and the third lockdown in England is clearly a further major setback, especially following the closures of non-essential retail and hospitality in many areas over the festive period.
Specific retailing subsectors are performing extremely well, and have benefitted from consumers spending more time at home – including essentials, pets, DIY, bikes, and furniture. We are also seeing more enquiries for medical providers such as dentists and osteopaths. Out of town, we are also seeing good demand for drive-thru food & beverage outlets.
The confirmation that all of Debenhams’ remaining 118 stores are to close means the loss of anchor tenants for a significant number of shopping centres and high streets, and longer-term impact on footfall. Casual dining and fashion, which were oversupplied pre-COVID-19, are also likely to see further retrenchment, and we may
also see some high street banks reduce their high
street presence.
An increasing number of town centres are now going car free or reducing car access in order to create more space for social distancing. This is helping to create a better shopping environment.
Locations such as Bath, Cambridge and Oxford with a previously high tourist footfall, and are now facing a lengthy period where overseas tourism is significantly reduced, although they should benefit from ‘staycations’ this summer.
Footfall in many suburban areas is holding up well, with more consumers looking to shop locally. Neighbourhood centres and the convenience sector continue to perform well.
ANALYSIS BY CITY
For detailed analysis on the commercial property market for each of our Commercial Edge regions, select a city below.
For further information, please contact one of our commercial property specialists:
OUR TEAM
Contact
EMAIL WILL
EMAIL WILL
07899 897045
Partner
Will Mooney
CAMBRIDGE
CAMBRIDGE
EMAIL CAROLINE
EMAIL CAROLINE
07342 067831
Partner
Caroline Penn-Smith
BIRMINGHAM
BIRMINGHAM
EMAIL JON
07720 537141
Partner
Jon Silversides
OXFORD
OXFORD
EMAIL ANDREW
EMAIL ANDREW
07771 820053
Partner
Andrew Hardwick
BATH/BRISTOL
BATH/BRISTOL
EMAIL SCOTT
07860 360821
Partner
Scott Harkness
HEAD OF COMMERCIAL
HEAD OF COMMERCIAL
EMAIL DANIEL
EMAIL DANIEL
07801 666137
Daniel Francis
head of research
head of research
EMAIL PHILIP
EMAIL PHILIP
07767 623819
Partner
Philip Marshall
BATH/BRISTOL
BATH/BRISTOL
EMAIL CHRIS
07800 572007
Associate Partner
Chris Hartnell
LEEDS
LEEDS
ANALYSIS
BY CITY
VIEW RESEARCH
Return
to top
Return
to top
Return
to top
Return
to top
Sq ft
(million)
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
Figure 1 Office take-up – Commercial Edge cities
Source: Carter Jonas
Bath
2009
2011
2010
2012
2013
2015
2016
2014
2017
2019
2020
2018
Birmingham
Bristol
Cambridge
Leeds
Oxfordshire
Figure 2 Prime headline office rents
Source: Carter Jonas
2020
2019
2018
Prime rent, £ psf
50
45
40
35
30
25
20
15
10
5
0
Bath
Birmingham
Bristol
Cambridge
Leeds
Oxfordshire
(science parks)
10-year average
VIEW RESEARCH
VIEW RESEARCH
VIEW RESEARCH
Select a section of our report to read our latest insights:
2021
EMAIL SCOTT
EMAIL CHRIS
EMAIL JON
The latest Commercial research from Carter Jonas
COMMERCIAL
OFFICE
VIEW RESEARCH
INDUSTRIAL
VIEW RESEARCH
RETAIL
VIEW RESEARCH
ANALYSIS
BY CITY
VIEW RESEARCH
