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 has completed on a deal to let 6 Conqueror Court, Sittingbourne – 1,692 ft2 of modern office space – on a new full repairing and insuring lease until January 2026.
6 Conqueror Court is a ground floor self-contained office with 7 parking places and is located off the busy A249, just 2 miles from the London to Dover M2 motorway and onward access to Europe via the Channel Tunnel and ferry ports.
The unit is on the ground floor of the two-storey end of terrace purpose built property. It has raised and carpeted floors fitted with cabling and floor points; comfort heating/cooling; DDA access; a mix of individual and open plan office space; cloakrooms and a well-fitted kitchen; parking for 7 cars and upkeep and maintenance of external and common areas is covered by a service charge.
After an initial 3-month rent-free period the rent annual rent is £27,072 and there is a break option and rent review in the lease for January 2021. The new tenant, Terradace Holdings Ltd, already occupy Unit 4 at Conqueror Court. They have taken unit 6 in addition to their existing property.
Mark Coxon, Director and head of Commercial Agency at Caxtons said: “Caxtons was appointed joint agent by the landlord, Conqueror Property Partners Ltd so we were doubly delighted to be able to finalise the let to Terradace Holdings on this well appointed and easily accessible office unit.”
More than 250 people from across the property and business sectors attended this year's launch of the Kent Property Market Report, which was researched and compiled by Caxtons and produced in conjunction with Kent County Council and Locate in Kent.
The breakfast event, held at the Great Danes Hotel near Maidstone on 2nd November, revealed some surprisingly upbeat statistics that bucked the trend of lacklustre results for the property and construction sector in other parts of the country.
Straddling major routes from the continent to the capital and beyond, makes Kent and Medway strategically pivotal in the south east. In addition, the cost of property and land has made Kent and Medway attractive for business and industry alike.
Growth continues in the office, business park and industrial sectors, and activity in the housing market is buoyant with developments such as the new Ebbsfleet Garden City well under way.
Increased exports have provided short-term gains in the industrial and distribution sector due, in part, to the Brexit vote and resulting fall in the pound. Also, the lack of development during the recession years has resulted in an increase in the average prime rent in Kent and Medway of 9.4% during over past twelve months.
Rents on business parks have remained largely stable and there has been expansion in the Life Sciences with the launch of the North Kent Enterprise Zone.
Average vacancy rates across the retail sector are down from 9.9% to 8.9%, which exceeds the national average and prime retail rent is increasing faster than in the previous 10 years.
House prices continued to grow and outpaced London during the year to August 2017. HS1 was providing new opportunities to live outside the capital and commute in,
Inward investment to the county continued apace and in the twelve-month period under scrutiny, Locate in Kent assisted 56 companies to find property occupying in excess of 700,000 ft2, an increase of 200,000 ft2 on the previous year.
Chairman of Caxtons, Ron Roser, said that the firm was delighted to be presenting such a strong picture of the sector in what had been a difficult year post the Brexit vote. "In our fifth year as main sponsor and contributor to the Kent Property Market Report it shows more than ever how investment in infrastructure, regeneration and business space is translating into occupier demand and improved investment prospects.
"This year's report reflects positivity across the property sector in the county and we look forward to a very busy year ahead."
Caxtons is one of the largest independent property practices in the south east. Operating from offices across Kent, Caxtons offers a range of consultancy, management and surveying services in the commercial and residential sectors, managing around 7,000 properties in the region.
For six out of the past seven years, Caxtons has been awarded the prestigious 'EGi Deals Winner Kent'. Based on commercial property lettings and sales achieved in the previous twelve-months, Caxtons has consistently performed well, with results showing year on year increases throughout the period.
Caxtons has researched and compiled information for the Kent Property Market Report, and publishes the information in tandem with Kent County Council and Locate in Kent.