Investment in East Midlands commercial property doubles to nearly £2.3bn in 12 months

The amount invested in commercial property in the East Midlands doubled to almost £2.3bn last year compared to the previous year.

Figures from commercial property specialist Innes England suggest the amount spent was also more than 70% higher than the five-year average.

The growth has been attributed in part to huge sums of money being invested in new warehouses thanks to the region’s central position in the UK distribution network.

According to the Innes England area’s annual Property Market Insite Review – monitoring property markets in and around Leicester, Derby and Nottingham – stock supply was struggling to keep pace with the strong rebound in demand investors post-lockdown.

The annual report said:

– The region’s retail market continues to thrive. The logistical deals included the sale of Amazon’s one million square foot warehouse in Bardon, Leicestershire, to Savills IM for £161million.

– Major sites under development include East Midlands Gateway near Junction 24, the new £150m global hub for Jaguar Land Rover near Ashby and the continued expansion of Magna Park near Lutterworth

– There was a ‘surprising’ 122% jump in office take-up in Leicester

– Retail footfall in all three cities has improved to meet or exceed pre-pandemic levels

– Nottingham and Derby have seen increased levels of industry adoption

– Commercial property investment in Leicestershire rose to £629m in 2021, nearly double the previous year

– Investment in Derbyshire more than tripled to £380.5m

– Competition for industrial sites in Nottingham has soared

Ben Robinson, head of investment advisory firm Innes England, said: “The industrial market accounted for more than three-quarters of all deals, a big increase from the year’s 50% market share. previous one and further reinforcing the region’s reputation as a “golden triangle”.

“Overall, 2021 was dominated by a large number of transactions in the ‘sheds and beds’ space, with offices and retail lagging behind.”

Peter Doleman, director of agency and development at Innes England, said Nottingham and Derby have seen increased levels of industry adoption.

Greater Nottingham has grown from 708,000 to 950,000 square feet, thanks to the availability of new speculative stock, quadrupling Grade A support in one year.

Derby has grown from 591,000 to 891,000 square feet, largely due to JD Sports’ one-time lease of 515,000 square feet on Derby Commercial Park.

Mr Doleman said: ‘Leicester saw a slight decline of 5 per cent, from just over 3 million square feet at the end of 2020 to 2.8 million square feet last year – still a level Substantial overall but reflecting the availability of larger buildings in Magna Park, for example.

The report indicates that supply is now the key factor in the industrial market.

Greater Nottingham is suffering from a “chronic” lack of supply, with levels almost halving by the end of the year to 434,000 square feet, with 50 per cent under supply.

Industrial availability in Derby has fallen to just over 200,000 square feet from 364,000 square feet in 2020, with no buildings over 30,000 square feet ready to occupy in the market.

However, that need has been met, with on-site St Modwen committing £46million to deliver 300,000sqft by the end of summer this year.

Leicestershire supply remains broadly the same as in 2020 at 3.2m sq ft, again reflecting the availability of some larger buildings, but will see the creation of a number of new speculative schemes which will bring inventory essential in the market.

Second-hand stock also remains thin on the ground in the region and commands high prices when available.

Mr Doleman said: “We have seen values ​​rise generally over the past two years, due not only to a lack of supply and the resulting competition for buildings, but also to Brexit and the pandemic that caused supply chain issues and inflation that increased the cost of development.

“What’s interesting is a general expectation from occupiers that rents and capital value would increase for new buildings, and a willingness to pay those levels.”

He said demand in the big-box retail sector, fueled by surging online retail sales, has seen a number of large sites expand.

The last six months have seen strong sales growth from pre-pandemic levels for a number of retailers, but the market has faced structural internet challenges, making it difficult to assess where to stand. situate headline rents, he said.

The retail and destination retail warehousing sector is healthy as investors look to secure their assets, while drive-thru restaurants and other roadside businesses such as auto supermarkets and home retailers have done well during the pandemic.