Business lettings healthy despite credit crunch fears

Apr 16 2008 by Tony McDonough, Liverpool Daily Post

LETTINGS in business parks both in the North West and across the UK are holding up despite the credit crunch, a new report reveals.

GVA Grimley’s bi-annual Business Parks Review: Spring 2008, suggests that, in spite of economic uncertainties, the sub- market sector of business parks is in good shape.

The report details healthy levels of occupational demand across the UK, which has contributed to a record year in 2007 with take-up totalling more than 5.4m sq ft across the UK.

The majority of the occupational transaction activity has been seen in the South East (980,000 sq ft) and Midlands (580,000 sq ft), where demand has been for well-located and good- quality space.

In the North West, demand continues but at a smaller scale, with the driving force continuing to be from occupiers seeking sub 10,000 sq ft.

The review recognises an increasing trend in the North West for developers and landlords with larger floor plate buildings to speculatively sub-divide floorplates in reaction to this demand.

The significant amount of space under construction reported in GVA Grimley’s last two bulletins has continued, with 3.4m sq ft of business park floor space currently under construction across the UK.

However, it does highlight that there has been a reduction in the proportion of space being built speculatively which is down from 72% at the end of 2006, to 62% at the end of 2007.

The amount of business park space under construction in the North West has fluctuated considerably over the past three years, from nothing in December 2004 to almost 500,000 sq ft a year ago.

The amount of floorspace under construction in December, 2007, is similar to the previous six months and now stands at 169,000 sq ft of space under construction at the end of the year with 88% being built speculatively, almost all of which is at Liverpool International Business Park, Cheadle Royal, and Central Park in Manchester.

Simon Reynolds, director at GVA Grimley, said: “Given the current economic climate, you would expect a sub-sector market such as business parks to struggle.

“However, the outlook is positive with increased levels of demand. We are forecasting rental growth of 2.9% in 2008 and averaging 2.5% per annum, over the next four years with a steady erosion in the amount of vacant stock. Underlying this will be a continued trend for flexible leases and tenant inducements driving many deals.”

tonymcdonough