That’s the forecast for 2016 from Halls Commercial managing partner Duncan Bedhall after a past year of genuine growth driven by increased occupational demand and further capital flows into the region.
He says: “Commercial landlords’ estates are in rude health with some of the lowest void rates seen for years. Rents and capital values saw upward trends as demand outstripped supply and commercial construction output increased.
“The coming year seems set to deliver similar conditions in the commercial market; there remains a chronic shortage of good quality stock particularly in the industrial and warehousing markets along the key motorway corridors where it is most sought after.
“We are therefore likely to see a significant increase in speculative development to alleviate some of this imbalance and developers and their funders should be well rewarded as a result.”
Bedhall adds that the office sector is now witnessing similar conditions in certain key locations such as Birmingham, with the latest Deloitte Birmingham Crane Survey showing 969,000 sq ft of office space under construction, the highest level for 13 years.
But Bedhall believes the return of large scale speculative office development is unlikely, with instead the more probable emergence of courtyard style schemes.
The robust occupational market should fuel continued interest from the capital markets in regional assets and further yield compression could well occur particularly within the secondary markets with interest rates looking set to stay at low levels, and the ongoing volatility of other sectors which has seen funds look increasingly towards bricks and mortar to achieve attractive and solid returns.
Much of this investment is likely to be channelled towards industrial and office assets although Halls anticipates continued growth in demand for the Private Rented Sector (PRS) in view of the continued pressure to deliver residential housing stock.
As ever, national and international events and economic performance indicators will ultimately have the greatest bearing on the performance of all property markets over the coming year with particular attention on the performance of China and the debate about Britain’s membership of the European Union.