Demand drives strong performance for Gloucester's commercial property market
17th July 2017
Gloucester's commercial property market performed well in the first half of 2017.
It was supported by robust occupational demand for industrial and office space, particularly from the engineering and residential redevelopment sectors.
In its half-year report, Market Monitor Update, property consultancy Alder King says despite the ongoing political and economic uncertainty, occupational activity has remained resilient this year, with strong transaction levels.
But of greater concern is the steady fall in stock levels across all size ranges and sectors. Office and industrial rental and capital values have increased in many centres across the region including Gloucester as supply shortages continue to bite.
The key findings of the report are:
• Half-year industrial take-up in Gloucester totalled 350,000 sq. ft, half of 2016's record take-up of 700,000 sq. ft. The most significant deal of the first half of the year is an agreement to construct a new 110,000 sq. ft. manufacturing facility at Gloucester Business Park.
• Industrial supply in the city has fallen further to 200,000 sq. ft., its lowest level for 15 years.
• Whilst developers remain cautious about speculative office development, there are a number of new build industrial schemes underway in Gloucester and there is strong demand for office and industrial refurbishments where schemes can be turned around quickly. Speculative schemes now underway include two buildings by St Modwen at Gateway 12 and Howard Tenens is about to start the part-speculative construction of Phase 2 at Severn Distribution Park which will provide over 440,000 sq. ft. in three buildings.
• Gloucester's office market performed well with take-up of 75,000 sq. ft. Notable deals so far this year include the 6,000 sq. ft. letting of 1260 Landsdowne Court on Gloucester Business Park to Lockheed Martin and the 12,500 sq. ft. letting of Building 1, The Office Campus at Barnwood to River Marketing.
• The supply of available office stock currently stands at 140,000 sq. ft. Of this only 30,000 sq. ft. is Grade A stock. There is growing interest in new build space as occupiers are often unable to source suitable existing buildings.
• The lack of supply in the city's out of town office market and increased construction costs have led to increases in the headline rent which has risen from £19 per sq. ft. to £20 per sq. ft. Rents on secondary office space have also increased to £14-15 per sq. ft. In the industrial market, Grade A rents have increased to £6.75 per sq. ft.
• The city's retail and leisure market has been active. Demand for drive-thru opportunities and out of town retail units remains strong with little availability. Whittle Square at Gloucester Business Park is fully let, as is St Oswalds Park.
• The investment market has been held back by a lack of stock. Prices have been sustained by strong demand and competitive bidding, particularly where benefiting from rental growth or opportunities to add value.
Adrian Rowley, partner at Alder King in Gloucester, (pictured) said: "The volume of transactions and take-up figures across Gloucester and other key centres of the South West so far this year have been very encouraging given the ongoing political and economic uncertainty and suggest that for most occupiers it's business as usual.
"We remain optimistic about the outlook for the second half of the year, with several high profile deals in the pipeline."
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