Experts from Birketts, Roche, and Price Bailey gathered in November at Norwich City Football Club to host their annual property seminar, diving deeper into the current challenges and opportunities facing the regional, national, and international property market.
Chaired by Price Bailey Tax Director, Steven Butcher, the well-attended session featured insights from Roche Partner, Graham Jones, and Building Surveyor, Paul Kelly, in addition to contributions from Birketts Associate and Senior Associate – Rebecca Bond and Steven Bell. Senior Managers, Charlotte Page and Jon Chambers from Price Bailey also shared current financial insights within the industry.
In the first part of our round-up mini-series, we summarise key activity from the National commercial office market, in addition to sharing an update on the Norwich commercial property market.
National office market
The current economic uncertainty is undoubtedly affecting the national office market. The key points discussed during the seminar included:
- A modest reduction in large office transactions across the country,
- A fall in Grade A stock levels which is seemingly delaying potential large space, and
- The professional services sector reducing their total floor area – which also appears to be the same for the insurance and financial services industries.
Established homeworking routines are becoming increasingly accepted among many employers, and is perhaps a significant reason why we are seeing a reduction in larger office transactions and floor area.
Figures for 2022 show investment volumes up 15% above the H1 (first half of the year) average, with overseas investors volumes. However, the investment landscape has changed dramatically in Q3 2022, and emerging reports are suggesting that investment volumes are significantly down on previous quarters, and are considerably less than normal trend levels for this time of year. Moving forward, the general sentiment is that volumes will be limited unless there is further outward movement on yields.
Regional office market
Focusing on the supply side of the Norwich region, the overall office floor area available in the market is back at pre-2021 levels – where it was just below 3,000 sq ft. This is following the approximate 450,000 sq ft of office space available at the beginning of 2022.
Grade A stock (high quality and premium location) availability in the region continues to be relatively low, and makes up around 20% to 50% of the total available space – which is in line with the 5 year average. The majority of spaces available are considered to be Grade B (average quality but perfectly usable), and these spaces are primarily found in Norwich City Centre.
In terms of demand, the total take-up of office space was just under 250,000 sq ft, which is a somewhat expected increase from 2020. The 2022 figures are yet to be concluded, however they are on track to surpass the 2021 figures. Currently, within Norwich it is estimated that there is demand for approximately 150,000 sq ft in total, and the vast majority of this is for space below 10,000 sq ft.
Increasing demand for modern premises
There is also a need for prime office rents to increase in order to reduce the requirements when justifying new development within Norwich. Occupiers are also becoming more focused on having modern and energy efficient accommodation, and the only way to deliver this is for landlords to invest in suitable refurbishments, M&E upgrades, or new stock. Many ‘modern’ offices within Norwich are approaching 20 years old – which begs to be questioned as to whether this is actually modern?
Overall, the prosperity of the commercial property market both in and around Norwich, and further afield, appears to be limited in the short-term by a lack of overseas investment which has occurred due to accumulation of factors including COVID-19 and economic uncertainty. Perhaps landlords should be focusing on modernising their premises to win-over the evolving demands of tenants in the long-term. For regional landlords with Grade A stock, they should not fear increasing rental prices.
Our next round-up article in the series will move beyond key trends and investment areas, and move on to explore the changing guidelines for the Minimum Energy Efficiency Standard (MEES).
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We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.
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