What's in store for this year?

Mar 18 2008 by Karen McLauchlan, Evening Gazette

What does the commercial property market hold for 2008? Experts from the Stockton office of chartered surveyors and property consultants Sanderson Weatherall, takes a look.

AS rumours of a downturn in the commercial property market sweep the media, the climate in Teesside certainly doesn’t seem to be cooling as demand and activity in all sectors continue to hike to new levels.

The region has long been synonymous with exceptional transport links, making it the ideal location to support local and national businesses.

This, coupled with an extensive local labour pool as well as continued developer interest and the associated provision of top quality schemes, means a number of commercial headquarters, industrial giants and retail players have been encouraged to sit up and take notice of what the region has to offer.

Office market

Interest in the availability of office accommodation in Teesside continues to be high and consistent levels of demand have led to something of an undersupply despite there being a number of new schemes in the pipeline. The area has proved to be an attractive option for local and national businesses and as a result, much of the office accommodation developed at recent schemes has now been sold or fully let.

David Jackson, director of office agency at Sanderson Weatherall says: “Over the last few years, Teesside has continued to develop as a first-rate business location, attracting a great deal of attention from occupiers keen to take advantage of its infrastructure as well as its cost-effective and flexible property offering.

“There have been a number of major deals in the area, including a significant example last year when Sanderson Weatherall acquired 55,000sq ft of space for Aker Kvaerner at Rokeby’s Surtees Business Park in Stockton. Following this, we then let a further 70,000sq ft to Student Loans at Lingfield Point in Darlington.

“The majority of requirements continue to be for larger premises but at the same time, there is very little completed stock of any quality available over 10,000sq ft at the moment. However the commercial property market is going from strength to strength and still possesses a great deal of potential. There are a number of pipeline developments which will soon be ready to step up and take off some of the pressure felt from incoming requirements, contributing to the on-going improvement of the area and continuing to put Teesside on the map.

“Development at Morton Palms will move forward with the construction of 50,000sq ft in the next phase and this should be ready for occupation in 2009. Lingfield Point has a fully fitted call centre of 50,000sq ft available now with an excellent parking provision. Similarly, following on from the success of Surtees Business Park, Rokeby Developments has recently acquired a 15-acre site at Queen Elizabeth Way on the Preston Farm industrial estate. The developer is now preparing plans for a 260,000sq ft development.”

There are some exciting opportunities ahead being led by Tees Valley Regeneration. Central Park in Darlington - the commercial element of which is being developed by Commercial Estates Group - is a regeneration flagship project for the Tees Valley, which will see £170m invested into the development of a 30 hectare brownfield site.

In addition, North Shore, situated along the North bank of the River Tees in Stockton, will be developed by Muse and Urban Splash to bring a brand new offering to market whilst taking the town to a new level.

Retail market

In the retail sector, a hive of activity is providing a number of new platforms to encourage incoming retailer interest.

Amanda Burbridge at Sanderson Weatherall said: “We are currently seeing a number of developments injecting new life into retail schemes through extensive refurbishment programmes and inward investment. Thornaby Town Centre is a prime example, due to undergo a complete overhaul by Thornfield Properties.

“The existing Asda superstore and the addition of a new 17,500sq ft Lidl food store with a remodelled St Peters Square will bring a fresh and much needed retail offer to the town.

“A new, modern and well-serviced scheme will provide 100,000sq ft of new retail floor space which equates to 21 new premises. Already, Wilkinson, New Look, Peacocks and Home Bargains have pre-let space and further deals will see a comprehensive offering for local residents when it is completed in early 2009.

“Similarly, Stockton Council has sold its remaining interest in Billingham town centre to Stockland Halladale, who will now be investing in a long awaited multi-million pound redevelopment project. Comprehensive refurbishment and development programmes are now in the pipeline to create better configured units to suit the requirements of incoming national players.

“At the moment, Asda, Dorothy Perkins, Bon Marche, Woolworths and Boots have space in the town and a new improved centre is bound to catch the attention of further well known occupiers to bolster Billingham’s retail offering. With work expected to start on site in autumn this year, the scheme should be fully complete by 2013.”

In addition to these schemes, the proposed extension to the Queens Street Shopping Centre in Darlington has been resurrected with plans to create 220,000sq ft of retail and leisure space. The scheme is expected to complete in 2010 and already, pre-lets have been achieved with Debenhams, Vue Cinema and Gala Bingo.

Industrial market

The industrial market remains strong with a wide range of manufacturing and logistics companies continuing to seek good quality space in the region.

Jonathan Simpson, industrial agent at Sanderson Weatherall, said: “There is a great deal of demand in the market and relatively limited supply, especially for smaller units available for sale - at the moment, these are being snapped up as soon as they become available.

“The second hand freehold market is where we are seeing strongest demand. Opus Land recently completed the refurbishment of the 360,000sq ft former MFI premises on Portrack Lane, Stockton. Units are available from 9,000sq ft and already significant parts of the estate have either been sold or are under offer.

“The last 12 months have also seen a significant level of unprecedented speculative development in the Teesside market from the likes of UK Land, Easter, Ravensworth and Helios, where new benchmark values have been set for industrial and warehouse buildings.

“Much of the demand is home-grown, with continued interest from local businesses looking to expand into new and improved premises. However, the region is also proving extremely attractive to companies outside of the North-east, keen to take advantage of the sound logistics network and employment pool that the region can offer.

“As a result, demand continues to gather space and with it, both land and rental values have steadily risen. Thanks to its strategic position midway between Leeds and Newcastle, Teesside is increasingly emerging as a major distribution hub.”

And will the Gordon Brown’s plans for making empty rates enforceable on vacant industrial properties for the first time have an effect on development levels?

“There is a possibility that we may see more premises become available as landlords try to off-load empty sites to avoid the outlay of funds to cover the rate payments” says Jonathan.

“There is also some talk that developers will be dissuaded from embarking on speculative schemes to avoid potential costs. But as long as there is a clear understanding of the implications amongst developers and landlords, including how payouts might be avoided or reduced, I don’t think the new legislation will have a negative effect. It is important, however, that advice is sought to make sure that returns on property continue to be maximised.”

Offering close proximity to the A1 (M) corridor, the A19, the East Coast Mainline, Durham Tees Valley Airport and Teesport - the second largest port in the UK (per annual tonnage handled) - the region’s exceptional infrastructure means it is well positioned to provide strong supply chain logistics at a local and national level.

Similarly, the development of the Northern Gateway Container Terminal, a new £300m deep sea container terminal on the South side of the River Tees, will mean Teesside’s presence as a serious national distribution centre will be greatly enhanced.

Once complete, the new port will open up an alternative for those who traditionally use the Southern UK ports, attracting container ships from around the globe and reducing travel time for goods aimed for the North of England and Scotland.

Overall, Teesside is going from strength to strength, attracting inward and home-grown investment to create vibrant commercial, industrial and retail hubs. With demand in all sectors remaining high, the region’s success can only continue.