I can recall being shocked and somewhat sceptical when a number of property experts considered that the market would not return to its pre 2007 level until 2015/2016 GFW.
They were not far wrong and as most landlords, vendors and developers have found out that date may still be slightly optimistic in northern parts of the county.
It was unfortunate but following the trend elsewhere in the country prior to the financial crash, outlying areas of Northumberland had commenced attractive development projects that had been long in existence in the wealthier parts of the country, such as office and business parks and speculative industrial estates. However, unbeknown to many of the developers the timing was misjudged and even now there are vacant units on business parks north of Tyneside, Cramlington and within Alnwick and Berwick that have been unoccupied since initial construction dates six or seven years ago.
There is very little chance of future development in such areas until the existing vacant space has been occupied and rental values improved, to the level with which it is economic for any speculative developments to take place. Landlords are still reluctant to accept freehold values at a lower level than that achieved in 2006/2007 and with few exceptions development projects have stagnated.
Rental values dipped from their high in 2008 and Landlords were prepared to offer incentives, often considerable, particularly to avoid payment of empty rates. Although Tenants now have less bargaining power than they did, this often means that their rental incentives are lower or they have the benefit of shorter rent free periods.
Industrial rents in mid-Northumberland which peaked at about £5.50/ft² are now creeping above that level and as building costs have increased it is likely that rents will have to exceed £6/ft² before developers have an appetite to carry out any further speculative schemes. Likewise, rental levels in office developments are still below a level that would provide profit and figures nearer £15/ft², which is considered ambitious at the moment, will be the break even rate for office schemes.
There has been a mixed response to the recession within retail property depending on the individual location. Berwick has suffered tremendously, with rental values in the town shopping area having fallen considerably from its prime rent of around £50/ft² ITZA. This is not only as a result of the recession but also as a result of the Local Authority consenting to a considerable number of out of town and edge of town retail stores, which have had a considerable adverse effect on the town centre.
Other towns within Northumberland have fared better. Alnwick in particular has had few long term voids in the main retail centre, although (as in many town centres) there is some local concern about the number of Charity shops opening in Bondgate Within. Zone A rents have risen to not far short of their peak of circa £45/ft² ITZA as recorded in the recent letting of 26 Bondgate Within, to the charity ‘Mind.’
Nearby the town of Amble has been the subject of considerable expenditure and improvement work carried out by the Development Trust and although there is no significant increase in rental values, the level of voids is very modest. ‘Arch’ who have taken over Northumberland County Council’s commercial portfolio are making every effort to generate interest in the trading estate in Amble; this could certainly do with a major employer but take up is extremely slow.
Morpeth suffered following the successful development of the Sanderson Arcade within the town centre and the large development of a Morrisons store on the town outskirts. For a period of time Newgate Street in particular had a number of vacant units caused by some relocation activity into the Sanderson Arcade and lack of trade due to the economic conditions. There have subsequently been a number of lettings and the levels of voids have been reduced. It is hoped that rental levels will soon be on the increase.
Other outlying towns within the north of the county have shown little evidence of rental growth and in areas such as Belford, Rothbury and Wooler there is such little new letting activity that it is difficult to obtain evidence at lease renewal or rent review.
However, the Co-op store in Wooler recently sold at auction and although there are some years left of the lease, the property is not occupied as the retailer relocated to a better and larger store within the town. A considerable sum was achieved at auction representing a yield of slightly over 6% on passing rent, which demonstrates that there is still a considerable demand for well let investment property in remote rural areas.
It is anticipated that future growth for all commercial property will be entirely dependent on the performance of the economy within the next few years. The realisation that Northumberland is a desirable place to live and work has led to a considerable growth in tourism and it is thought that this will assist in providing a steady growth and improvement in occupation rates, for all types of commercial property. Time will tell.