As one of the leading voices in the Lancashire property market, we are often asked by local business publications to provide comment – either on a specific property-related topic, or the state of the Lancashire property market at large.
We were recently asked to provide some comments on the commercial property sector for Lancashire Business View. Here is what we said…
Over the past 12-24 months, we’ve noticed a significant shortage of quality development space in the region. Businesses typically want quality, modern space with good motorway links, of which there is currently a lack of supply.
There seems to be very little commercial land available to meet such property requirements, with what little land there is available proving difficult to ‘unlock’ from a planning perspective.
A planning application itself can cost tens of thousands of pounds to prepare, with no guarantee of a planning approval. Furthermore, Planning Applications require more supporting documentation and surveys than ever before and more conditions are being applied to planning approvals than previously, which take time and money to discharge.
Securing planning consent is a difficult and expensive hurdle, yet buildings can only be built if the land has Planning Permission. Even after all of the stages of planning have been navigated, the delivery of development sites can take years to evolve, rather than months.
To compound the issues, many banks are reluctant to lend, development finance can be expensive, and construction costs are continually rising, and so there are very few developers/landowners who are in a position to take developments forward.
Within the current framework of the planning process, and in the absence of government incentives for developers, it seems unlikely that anything will change anytime soon. Easier access to development finance would also be beneficial but banks are reluctant to lend without robust appraisals, and due diligence reports before committing to lending.
Owner-occupiers of thriving growing businesses seem keen to buy new premises, where affordable.
We are acting as Employer’s Agent to deliver new-build industrial units, and we are also undertaking the role of Monitoring Surveyor on behalf of lenders for other commercial development schemes that are at various stages of procurement/construction.
The developments that we are involved with are mainly being bought by owner occupiers – for example, we have overseen a new-build 35,000 square foot engineering factory for a growing engineering firm, who were relocating to new premises in Nelson. Similarly we’ve also been involved with bespoke new-build children’s nurseries in Pendle and Clitheroe; and a new-build office blocks at Euxton.
The design of these buildings was agreed before the developers began construction. It is unlikely that the developers would have built such units speculatively without having buyers lined up.
We are also currently monitoring the construction of small starter units that are being built speculatively and demand for these seems reasonably high. These are is still under construction, but sales are lined up for over 50% of these units.
Industrial/trade-counter style units and starter units are generally being favoured, partly because they are economical to build, and it spreads the developer’s risk in terms of them being easier to sell separately as opposed to selling one big building. Activity in the retail sector is still relatively low and offices are expensive to build, so there’s less activity in these sectors.
Another interesting trend we’ve seen recently is new entrants looking to invest in the commercial property sector – in the form of high net worth individuals and wealthy families. Perhaps due to the poor interest rates being offered by banks, and stocks and shares currently being so volatile, this new wave of investors are turning to commercial property investment. The beauty of property is that people actually see bricks and mortar and see something for their money, instead of buying stocks and shares which they don’t actually see!
We’ve also seen some investors from outside of the Lancashire area buying property – both residential and commercial – because they think that it’s cheaper in this region – then looking to let the property to tenants.