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Bristol and Cardiff set to see largest rises in office rents in UK
A lack of supply of Grade A space in the UK’s regional cities is currently driving significant demand for value-add office refurbishment opportunities, according to new research. With average take-up across the UK’s regions at 4.6 million square feet, with availability currently down 18% on 2007 levels, there is under a year’s supply of Grade A space coming to the market in the next three years says the outlook report from real estate firm Savills. It explains that speculative development in the regions has risen 129% on the same time last year to approximately 3.5 million square feet, but with 28% pre-let it is expected that this will largely be absorbed in the first and second quarters of 2016. Savills says that the lack of available space has driven demand for value-add office opportunities to help plug the gap, with January 2016 marking the 41st consecutive month of refurbishment activity. With competition for space outstripping supply, the gap between the rents on new build space and the best quality refurbished stock has narrowed, although it is likely to widen once more as new developments are completed later on in the year. New build office rents in Bristol, for instance, currently stand at £28.50 per square foot compared to £27 per square foot for refurbished office space, whilst in Leeds new build rents of £27 per square foot are only £1 higher than those for refurbished space at £26 per square foot. Savills forecasts that Bristol will see the highest growth in rents of 12% by the end of 2016, followed by Cardiff at 9%. The lack of supply has also forced some occupiers to look outside CBD’s at business park locations. Savills gives Birmingham Business Park as an example which has seen its vacancy rate drop from 75 to 15% over the last 12 months. ‘UK wide job creation is driving demand for good quality space in amenity-rich and well-connected regional cities, leading to a squeeze on space and rent rises. By the end of 2015 rents in the M25 office market had risen 10%, Manchester by 6% and Leeds 4%, and we’re set to see strong rental growth in many other regional markets before 2016 is out,’ said Claire Bailey, associate director, Savills commercial research. ‘While speculative development has picked up pace, a lot is already pre-let so we’re going to see a pinch on new build towards the end of 2016 and into early 2017 when occupiers are going to have little choice but to turn to refurbished stock or possibly even pre-letting to meet their requirements,’ she pointed out. Savills reports that in the past year regional offices prime equivalent yields have moved in by 50 bps to 4.75%. The proportion being invested in office markets outside London has also risen over the last two years, with regional volumes in 2015 standing at 31% of market share, compared to just 16% of total… Continue reading
UK house prices dipped in February but longer trend is still upward
House prices in the UK in the three months to February were 3% higher than in the previous three months whilst the annual rate remained unchanged at 9.7%, the latest index shows. But month on month prices fell by 1.4%, according to the data from the Halifax, taking the average price of a home to £209,495. Martin Ellis, Halifax housing economist pointed out that overall prices continue to rise at a robust pace driven by a significant imbalance between supply and demand. ‘Whilst this position is likely to continue over the coming months, there are some tentative signs that the supply situation may be beginning to improve,’ he explained. He also pointed out that instructions for second hand properties coming up for sale have increased in the past two months and the level of house building increased significantly in 2015. ‘Further ahead, increasing affordability issues, as house price increases continue to exceed wage growth, are likely to curb housing demand and cause price growth to ease,’ he added. An analysis of the Halifax figures shows that the quarterly rate of change was the highest since June 2015 when it was 3.3% and the annual rate remains within the 8% to 10% range where it has been for nearly the entire period since the start of 2015. The fall in values in February offset much of January’s 1.7% rise but Ellis explained that monthly house price changes can be volatile and the quarter on quarter change is a more reliable indicator of the underlying trend. The increase in average house prices has exceeded total average employee’s net earnings in 28% of local authority districts across the UK, some 108 out of 380, over the past two years, according to recent Halifax research. According to Russell Quirk, chief executive officer of eMoov, the monthly figures could be seen as a sign that the UK market is cooling but the longer term trend is still upward. ‘Demand is always an influential factor where an increase in house prices is concerned, so the impending stamp duty changes due in April have no doubt helped to keep the UK market buoyant,’ he said. ‘There has been a flurry of buyers keen to secure that second home or buy to let investment before the April deadline, as well as an increase in the stock available, due to savvy buyers looking to cash in and obtain a higher price than usual during this period of high demand,’ he pointed out. ‘We expect once the stamp duty dust has settled the market will cool slightly, but whilst UK and foreign buyers are still fuelling this increase, the issue of affordability will continue to take a back seat, rather than helping to restrain a continually inflating market,’ he added. Continue reading
Research reveals the extent of sub-letting in the UK without landlords’ permission
One in six tenants in the UK have rented out part or all of their property to someone who isn’t on the lease agreement, new research has found. Some 25% who sub-let their property didn’t check the terms of their lease to see if it was permitted, while 34% had not informed their landlord of the decision, according to the survey by landlord insurance provider Direct Line for Business. Of the sub-letters who did not inform their landlord, 23% got found out in the end anyway and the firm points out that the consequences when landlords catch tenants sub-letting can be severe. Indeed, some 11% of cases the tenants named on the lease were evicted with 6% losing their deposit in the process. Other repercussions include landlords increasing rental charges which happened in 22% of cases, 14% were fined and 8% given a formal warning. In spite of this, Direct Line for Business’s research reveals that 2016 could see an increase in the number of people sub-letting their properties. Some 15% claim they are thinking about sub-letting part or all of their rented property by advertising on property letting websites such as Airbnb. ‘The average monthly rent across the UK currently stands at £739. This means on average, approximately a third of people’s income goes towards accommodation. With the market having seen a five per cent increase in average rents in the last year, it seems that a larger number of renters are tempted to offset this expense by sub-letting their properties,’ said Nick Breton, head of Direct Line for Business . Over the last two years, Landlord Action, a firm that represents landlords, said it has seen an 18% increase in the number of instructions from from landlords with sub-letting cases. ‘Sub-letting is fast becoming one of the leading grounds for eviction, alongside rent arrears and Section 21 for possession only. This has been fuelled by sky high rents preventing some tenants from being able to afford even single-unit accommodation, forcing many to resort to bedsits or shared accommodation,’ said founder Paul Shamplina. ‘Organised sub-letting scams are also becoming more prevalent, where tenants, or sometimes even fake tenants, advertise properties and rooms on holiday/accommodation websites in order to cream a profit without the landlords’ consent,’ he added. The research also found that 28% of tenants who had sub-let had done so to friends or people recommended to them. Family members accounted for 21% while 19% of renters have sub-let to strangers responding to an advert. Sub-letting is most common in the North West and West Midlands with 27% of private tenants say that have sub-let their properties. In London it was 23%, it was 9% in the South East 7% in Northern Ireland. ‘There could be some serious consequences for tenants who sub-let, but landlords need to be aware that in these circumstances there could also be insurance implications. Sub-letting is not covered under… Continue reading
