Commercial Property – Prospects look good for 2007

Expectations for the commercial property market in 2007 look promising with the economy strong and a growing demand for leasehold and freehold properties across the region, according to regional property consultants Aitchison Raffety.

Looking back, 2005 and 2006 were somewhat chalk and cheese with 2005 being a very slow year until November when market activity increased substantially and this lasted through the first half of 2006 until the normally quiet period in August. However, since summer the market has never fully recovered and the latter months of 2006 were relatively quiet. So what for 2007?

“Prospects would appear good with the economy continuing to strengthen albeit with today’s interest rate rise to stem inflation”, says Ian Archer, director, Aitchison Raffety. “The general level of availability of property is relatively low and whilst this was balanced by a low demand for the last few months of 2006, traditionally the first few months of a new year are the busiest period and we would anticipate this being the case in 2007. The next few months will prove whether or not our expectations are correct”.

According to Aitchison Raffety the office market saw a small recovery in lettings last year although in Hemel Hempstead this was largely due to the Buncefield oil blast. “During 2007 a number of office buildings will come back on to the market as short term tenants move back into the buildings which were damaged” says Archer, adding: “it will therefore be interesting to see what effect this will have on the market.”

The freehold office market however is proving to be very strong. “We have a large number of enquiries particularly in the Watford and Rickmansworth areas but also in other towns. “There is still a very limited supply and some larger buildings are now being divided into horizontal ‘strata’ sales to be sold on a virtual freehold basis, similar to buying a flat. An example is Amberside, a development in Wood Lane, Hemel Hempstead where we are selling small offices from 700 sq ft to 5,000 sq ft.”

The industrial sector also saw an improvement during 2006 with the freehold sector leading the way. Aitchison Raffety report an improvement in enquiry levels in all size ranges but the strongest demand is for units under 5,000 sq ft.

In order to meet this demand, developers, Space Group, are proposing a future phase of freehold industrial units at Orbital 25 in Watford of between 2,100 sq ft and 8,400 sq ft. Two new freehold developments in Hemel Hempstead, providing units ranging from 1,830 sq ft to 8,008 sq ft, will also help to meet the demand.

According to Archer “the investment sector remains very hot with historically high levels of liquidity in the economy. Due to low interest rates, yields are at historically low levels and accordingly prices are historically high. So much so that in the UK many main stream investors are now looking increasingly abroad where higher yields can be obtained especially within Europe where the economy is expected to improve over forthcoming years. However, despite the quarter per cent rise in interest rates, there seems to be little sign of any cooling of the domestic investment market. This can be attributed to the number of people trying to set up their own pension fund rather than rely on traditional pension providers.”

“Overall, 2007 should be a good year for commercial property in line with the continuing strength of the economy and general lack of any significant new supply of properties in the nearby vicinity” concludes Ian Archer.

Anyone requiring further advice in terms of commercial property is welcome to contact their nearest branch of Aitchison Raffety.