The industrial and retail sectors have been the star performers in the commercial property market in Peterborough and the Eastern region with the spotlight off the office market except in select locations where speculative building is making a return.

That's the verdict reached by Barker Storey Matthews in reviewing the evidence of the deals done in 2017 by its four agency offices which span the region from operational co-locations in Peterborough, Huntingdon, Cambridge and Bury St Edmunds.

In compiling its year-end review of 2017 and preview of the market in 2018, the property agency concentrates on the ‘sheds and shops' sectors where occupier demand remains strong against the backdrop of evolving markets in both sectors.

The impact of the 2007/2008 financial crisis is playing out in the ‘shed' sector a decade on. This sees a lag in the supply of modern units where warehouse and depot facilities, as well as industrial and manufacturing buildings of significant size and scale, are sought to accommodate the increasingly automated nature of logistics and distribution fulfilment.  

Occupier demand for industrial, warehousing and distribution space has remained relatively strong in 2017 and is expected to maintain at this level in 2018.

A shortage, along with improved trading conditions, has driven rents and capital values - the latter of which has been further pushed by falling yields.

The appetite for investment in industrial property in the Eastern region has continued apace in 2017 and prices are now, in most cases, substantially higher than they were only three to four years ago.

In Bury St Edmunds, the squeeze is on the availability of the mid-sized industrial units.

Referencing its Peterborough and Huntingdon offices in the industrial unit market in the region, the property agency points to the return of speculative building this year and the speed with which occupiers are committing across a broad range of sizes.

The retail market is changing in response to changing shopping habits. The Internet as a marketplace has led to pressures on the high street with many retailers downsizing floor areas and store numbers. The discounter market remains strong but consolidation is in the air as 2017 ends and 2018 begins as operators' property portfolios mature.

'Healthy' high streets have started to evolve with the food and beverage sector coming to the fore in regional locations that were once seen as non-prime by the operators, according to Barker Storey Matthews' experience of 2017.

Traditional retail pitches in and around Peterborough's Cathedral Square are morphing to become more leisure and lifestyle-led areas and attracting restaurant and café occupiers, prompting a change for commercial property in Peterborough.

Cambridge retail keeps apace with the shifting of shopping and dining habits. A ‘foodie' boom has fanned out from the historical city centre core to the areas of Burleigh Street and Fitzroy Street. 

To commercial property investors, Barker Storey Matthews would always make the case in appreciating the value of Cambridge's neighbourhood districts - such as Mill Road, where independent retailers still make their mark - in positioning retail in the city.

The Cambridge commercial property is dominated by its office market. In 2017, there was the sense of the city's market catching up with itself, with pre-let appetites being fulfilled by the newly-built and being-built stock.

Yet there is still a question mark about suitable stock availability to fulfil the demand of the natural churn of enquiries, particularly those looking for larger premises. Speculative building opportunities occur where the development pipeline and land supply will permit and provide.

 In the office market across the region, Barker Storey Matthews' experience is that the occupational market has begun to slow, perhaps due to the lack of clarity surrounding the ongoing Brexit negotiations.

There has been a noticeable air of caution with tenants not prepared to commit to increasing expenditure either through moving costs or taking additional space. Where lease renewals are being negotiated, Barker Storey Matthews' agents are often seeing requests for tenant break clauses at two or even three years.

In representing landlords too, its agents' advice is to take a robust view. While uncertainty leads to a lack of commitment, an overall shortage of space helps sustain rents.

Commenting on 2017's industrial and retail star performers in the region's commercial property market, Steve Hawkins, Managing Director, Barker Storey Matthews says, "The spotlight has been on sheds and shops this year in response to our changing lifestyles which are, increasingly, steered by technology."

It is hard to see how this will change in the coming year unless the household expenditure is severely curtailed.

However, consumer habits of successive generations are becoming deeply ingrained. This would appear to militate against a dramatic compromise in our day-to-day lifestyles in the short to medium term and so property demand for sheds and shops is likely to endure for the rest of the decade."