Pictured above: Helen Longstaffe

Helen Longstaffe, Head of Business Space Agency at DTZ in Nottingham, gives her thoughts on the office market:

"At the start of 2010 there was a general concern that the city centre office market would grind to a halt and the number of transactions would fall dramatically. These predictions proved to be somewhat downbeat and the Nottingham market has been resilient against a backdrop of widespread business concern.

"Overall take-up during 2010 within the city centre reached almost over 250,000 sq ft which is above the long-term average and is largely attributable to the diverse nature of demand active within the city.

"The market has, however, faced numerous challenges. The build up to the general election caused a number of large occupiers to delay implementing their property strategy, and a combination of the emergency budget and the largest public sector spending cuts since 1981, caused consumer confidence to hit an 18 month low during the autumn period.

"Concerns about future occupational demand and the significant levels of supply evident in the market have resulted in an environment where extremely competitive terms are available. Key deals during 2010 included, E.ON acquiring a 105,000 sq ft pre-let at the Guildhall site, Ikano acquiring 17,300 sq ft at Waterfront House and Crytek acquiring 17,500 sq ft at Southreef.

"The absence of substantial new development within central Nottingham means that the supply of grade A accommodation will continue to fall over the next few years, causing larger occupiers with a lease event during this time to actively consider their strategy in 2011.

"Active demand in the market suggests that consolidation will be the key driver of demand. Thos organisations with a lease expiry or break clause in the next 12 - 24 months are frequently able to take advantage of current market conditions and relocate their staff into better quality accommodation that offers increased flexibility and improved profile for the business.

"Looking forward, we anticipate that demand during 2011 will originate from a wide range of sectors and the general level of demand will remain steady during the first six months. Rents for better quality space are expected to remain largely unchanged over the course of the year and a modest reduction in rent frees or other incentives available to incoming tenants is anticipated." 

Pictured above: Philip Glenn

Philip Glenn, Head of the DTZ Nottingham office gives a Valuations perspective:  

"Throughout the second half of 2010, bank property funding tightened considerably with all the major High Street banks looking to re-gear facilities or preferably exit existing loans. In some cases this resulted in banks considering more aggressive action when their customers have breached banking covenants.

"Despite this, banks do have an appetite to lend but their criteria restricts them to only consider properties in prime locations that are well let with long-term income from tenants with strong covenants. This is mirrored by Pension Funds which are also solely focused on prime assets. Over the course of 2010, this has resulted in a widening gap between what is deemed prime and secondary, a situation enhanced by the lack of prime stock in the market. Competition from purchasers for prime assets therefore, remains strong in all property asset classes, whilst those not classed as prime are struggling to attract interest.  

"Loan to value levels at which banks are willing to lend stabilised over 2010 but are at a significant discount compared to the level obtainable two to three years ago. This causes concern to existing bank customers who are unable to obtain comparable terms when the time comes to refinance. The full effect of this scenario will be keenly viewed during 2011.

"Speculative development funding is non-existent with pre-let developments experiencing difficulties in obtaining funding. The fragility of the occupational property market is not assisting the 'risk factor' that is inherent within any property development appraisal. This is making some schemes unfundable or leads the banks to suppress land values, which in turn, is stalling land transactions.

"We anticipate further bank balance sheet repair over the course of 2011, especially once the Irish government has digested the full extent of its property holding, having taken control of the property debt of failed Irish-based institutions. We anticipate this will represent an opportunity for cash rich property developers and investors during the course of 2011."