Six months after the launch of the latest Kent Property Market Report, Mark Coxon, head of commercial agency and one of the authors of the 2017 report, shares an update.
The last 18 – 24 months has seen the greatest increase in both land values, industrial rents and investment yields, which are now higher or have hardened when compared with pre-recession 2008.
The amount of money being invested into the sector by UK pension funds and overseas investors is at an hiatus where yields on multi-let industrial estates are now reaching 4%, the lowest they have been. Similarly, single let sheds are seeing yields in the order of 5%, the disparity due to the risk in taking on one single asset.
What is true throughout the South East and not only in Kent, is the lack of investment stock. Primarily, investors have nowhere to put their money if they do sell. Coupled with a lack of development over the last 10 years this had led to little availability.
Industrial land values
Although there is a lack of land to actually build in Kent, land values have similarly risen to a level not seen before. In Dartford, for example, land values are now at £1.5m per acre; and moving further east Rochester is now off £650,000 per acre. Sittingbourne has lagged behind but is trading at £450,000 per acre, which is a 10% increase over the last 6-months but is seen as good value. Closer to the M25, Sevenoaks is at £1.5m per acre. East Kent has seen little increase due to relative lack of occupational demand.
The county's existing stock has eroded with the increase in pre-let activity. We have seen the London Medway Park in Rochester letting over 600,000 sq. ft. over the last two years. Speculative construction is currently evident in Belvedere with over 200,000 sq. ft. within 3 buildings having recently been built.
The self-storage and trade counter market has also come back - the former finally putting behind them their recession driven reluctance to move beyond the M25.
Where the buoyant residential sector is crossing over and affecting the industrial market is on deals from house builders acquiring sheds and land to store product for their modular home concepts. Berkeley Homes have purchased 10 acres in Northfleet to construct a modular build facility, and other similar developments are planned elsewhere in the county.
Kings Hill and Crossways Business Park are seeing some demand for the larger floor plates, but the majority of activity countywide is below 5,000 sq. ft. Gillingham Business Park has, for the first time in its history, been near to 100% let.
Sevenoaks and Bromley are leading rental levels at £30 per sq. ft. Other centres such as Chatham Maritime are yet to see any significant lettings this year. The east of the county, in particular Ashford, has had a few successes with Ashford pre-letting an entire floor of the Quinn development-Connect 38 - the first new town based office development in Kent for approximately 20 years. Discovery Park's new owners are in the process of applying for planning permission to extend the park. Some local towns are still struggling with substandard stock, although due to Permitted Development rights, much of this has been lost to residential.
There is little to report on the investment market due to lack of stock. What has been on the market has needed a robust occupational story to catch the investor's eye, but sadly Kent office investment does not always attract the major funds. The former Chambros House is under offer to the NHS with secure income off 7.5%; two offices at Eureka Business Park - 200 and 210 - are available at 8.6%; this follows the sale of Units 110 and 120 Trinity House to the London Borough of Bromley in April last year at 6.16%.
The picture wouldn't be quite complete without a brief comment on retail. The high street always loses to out of town retail centres, but actually continues steadily, though fortunes are very much town specific. The latter are all performing well with very few voids. Most noticeable lettings include the St James Retail and Leisure Development in Dover where the Food Warehouse, part of the Iceland Group, have acquired.
With a host of Company Voluntary Arrangements (CVAs)and administrations, most towns will be affected by an increase in stock, although these retailers have always picked good locations within the high street so re-letting may not be so much of a problem. There are few investment transactions, but high street retail is still reaching around 4% for good covenants and long leases.
Other sectors such as out of town retail, hotel, and the food and non-food sectors are all desperate for well-located sites. Similarly local authorities are actively looking for sites to accommodate their D1 school requirements. Sites for motor dealerships are also hard to come by, although Jardine's has just acquired 3.5 acres, which fronts the A26 at Tonbridge, for a new facility.
The funds and private equity companies continue to pile into emerging sectors including accommodation for students, where Deutsche Finance Ltd has purchased Canterbury Student Manor. The Care home sector has had similar success with Legal & General acquiring in Leeds Village at Ledham Farm.
Caxtons is hoping for another 12–18 months of a good and stable market before one or two drawbridges have to be pulled up, following the UK's exit from Europe, but who can actually predict what the Brexit effect will be?
Caxtons Chartered Surveyors is delighted to have completed the let of 4,435 sq ft of office space on a new full repairing and insuring 5-year lease at The Courtyard, Gillingham. Incoming tenant Dynasafe BACTEC Ltd, a leading Explosive Ordnance Disposal and Mine Action company, will be moving into their new offices as soon as possible.
The Courtyard is a development of individual office buildings ideally located in north Kent, adjacent to the A2 and the A278 dual carriageway with the M2 Motorway (J4) approximately 2.5 miles away, which gives direct access to the M25 or Channel Tunnel and Ports.
Each office at The Courtyard has excellent natural light, is carpeted and has suspended ceilings. There is ample parking on site.
Mark Coxon, Head of Commercial Property Services at Caxtons said " The Courtyard provides a well managed and secure business environment for a variety of occupiers. It is set in 150 acres where the office buildings surround a landscaped square in a mature woodland setting, yet with easy access of main arterial routes. We are happy to have been able to meet the new tenants exacting requirements and that they have found the right premises to suit their needs."
The Courtyard, Gillingham
Commercial Negotiator James Squire who works in Caxtons' Maidstone offices said "Commercial sector property, whether for sale or to rent, has been more buoyant in recent months than for some time. There is no particular pattern to the type, size or location of property, it seems there is just more impetus from buyers, sellers and tenants – whether starting out on the property ladder or expanding."
Two particular properties that have changed hands in the first quarter of this year demonstrate that it is not just in the big towns that things are moving.
A new 20-year full repairing and insuring lease was agreed in February on an end of terrace two-storey brick-built property in Meopham. The premises comprise a ground floor commercial unit and first floor offices with car parking at the rear of the property.
James continued: "At first glance these may not seem earth shattering deals, but it does demonstrate that there is positive activity across the entire property market in Kent."
New Meopham male grooming establishment