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Investment: Views from our core

May 30, 2017

Barker Storey Matthews' latest Commercial Property Supplement offers expert views on a number of commercial property sectors; here, Steve Hawkins, the firm's MD, rounds up the regional view of local investment markets.

Investment: Views from our core

It will come as no surprise that the common thread which runs through the views offered by our commercial agents on the ground in our core offices covering the eastern region from Bury St Edmunds, Cambridge, Huntingdon and Peterborough is a strong investment market underpinned by continuing low interests rates coupled with rental growth.

There is an acknowledgement by all of a hardening of yields in the twelve months since Q1 of 2016.  Against the national and international political and economic uncertainties which have come in to sharp focus since June last year, investors are struggling to find returns elsewhere and so sentiment in the commercial property market remains steady enough with a view to rising rents and capital values and a fast-moving lettings market when properties become vacant.

Around the Huntingdon area, demand for industrial investment stock exceeds that for offices and we are seeing strong demand for all multi-let estates as well as single buildings, with larger, modern buildings in particular demand.  Further north in Cambridgeshire, the industrial warehouse sector also remains popular, but an overall lack of transactions could suggest that the office sector leads the way with a number of high profile buildings being sold in Peterborough.

Several office buildings let on leases with around 10 or more years to run have exchanged hands well below 7 per cent. Thorpe Wood House, let to Anglian Water with around 11 years unexpired, was marketed with a guide price of £13.25 million - representing a net initial yield of 7.5 per cent attracted bids of around 6.75 per cent yield.  Pegasus, at Orton Southgate, let to BGL with around 10 years left, has attracted a similar yield and capital value of around £14.5 million.

The residential sector has continued to perform well even with national statistics showing signs of weakness with the London market cooling substantially. Substantial road infrastructure investment in the Huntingdon to Cambridge A14-corridor supports the strong demand for residential development land and with end values approaching £280 to £290 psf for good quality housing - with higher rates achievable for small flats - land values can fetch up to the equivalent of £2million per acre for higher density schemes. 

We recently concluded the sale of 0.25 acres located on the, Huntingdon ring road, on behalf of Cambridgeshire Constabulary at a price of half a million pounds

It is also transport infrastructure improvements driving the newest investment opportunity in Cambridge city.  The new Cambridge North railway station - the city's second station - becomes operational this month (May).  It unlocks one of the largest remaining brownfield sites in the city and will be the catalyst for mixed use development on a site close the Cambridge Science Park and its complementary business and research parks on the northern edge of the city.

The pace of student residential development has slowed a little but remains buoyant enough. The commercial tone and pace set by Anglia Ruskin University in this sector in the past few years is being echoed in the redevelopment of the 1970s office complex Mount Pleasant to 243 student rooms with a pre-let agreed to one of the University of Cambridge's colleges.

Net yields on more conventional retail and office premises investment sales pitch themselves around 4 to 5 per cent, still demonstrating the huge demand for prime investment assets in Cambridge city.

The echo of lack of investment opportunities and the hardening of yields in Suffolk is also reported.  Bury St Edmunds is a high profile market town and it's such towns with a strong local profile which are providing an attractive alternative to the regional city centres.  Secondary locations provide more attractive returns reflecting enhanced risk.  A 12,383 sq ft industrial unit in Mildenhall with a tenant in-situ, was sold for a price with a net initial yield of 9.23 per cent. 

Commercial agents' eyes are all on the development of the 57-acre Suffolk Business Park  by Churchmanor Estates for whom we act as joint agent.  The Park is part of a wider employment area of 168 acres and the "Eastern Gateway" approach to Bury St Edmunds.

Investment opportunities remain in the eastern region but with competition at its highest level for a number of years, you should take advice from those with experience and a proven track record and enduring presence in the local markets.

For more information on investment, funding and development in our core areas, see http://www.bsm.uk.com/investment-funding-development


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