Mind the commercial property gap
11th December 2013
Walk around Nottingham and you’ll see plenty of ‘To let’ signs – the recession saw to that, as the Bonfire of High Street caught many independent and national chain stores with rents that simply weren’t sustainable.
Meanwhile, on the office and commercial side, many businesses decided to stay put, as a decreasing workforce meant expansion wasn’t on the cards, whilst any speculative development was put firmly on the backburner.
All this has led to a very polarised market, with an ever-widening gap appearing between the best, Grade A space (brand new, open-plan stock, often with raised access floors and air-conditioned throughout), and Grade C space (usually second-hand, unrefurbished, solid-floored stock, which doesn’t benefit from air-conditioning). It is the latter which Nottingham has a proliferation of – and it’s a worry because very little of it is actually shifting in a market that is still tentative about investment.
One only has to look at the latest figures from the Nottingham market, which say there were 595,360 sq ft of Grade C space still available in the city. And that’s a huge figure when you consider that some 146, 912 sq ft of Grade C deals were done last year.
Compare and contrast with the amount of Grade A space available in Nottingham, which amounts to just 71,231 sq ft – which a medium-sized inward investment could fill tomorrow, if they were on their way.
The Grade A pipeline is full of names we’ve been hearing for a long time now, with some 2,240,957 sq ft of space promised at the likes of Unity Square and Eastside (amongst others) – schemes that have been doing the rounds longer than some have been in the industry in Nottingham.
But those schemes will look after themselves – my concern is for the over half a million square foot of unused, unrefurbished Grade C space which could end up blighting Nottingham for decades if action isn’t taken.
The Council, to be fair to it, has taken action on this dilapidated stock, making it easier to change its use – from commercial to residential, for example. But with a mass of student accommodation currently underway or completed in the city centre, how long before that market is saturated. There are only so many students who want to or can afford to live in the city centre after all (source: Downing Students).
What the Council needs to do to bridge the gap between Grade C and Grade A space is offer landlords grants or other incentives to help then invest in their properties. The Council could also lobby central government to make empty property relief time longer on offices – it is currently 3 months, this could be extended to 6 months.
It’s all very well having the big, bright glass-fronted schemes dotted around the city, but unless something is done to bring forward the refurbishment of the 595,360 sq ft of neglected Grade C stock, then the gap between the best and the worst office space in Nottingham will only grow wider, and will hold the city back for years to come.
My message to landlords is this: if you’re a landlord with empty office accommodation, take a look at these statistics and consider if you’re spending enough money on making your office stock look as good as it possibly can.
Also consider the danger of your tenant going out of business – without that tenant having settled a dilapidations claim. Very soon what you thought was an asset, could very well become a liability if you haven’t invested the funds to make your office into a space a new tenant will want to move into.
And ask yourself this: does your office space stand a chance of being considered the next time there is a requirement in the market? Give yourself a fighting chance by investing and modernisning now – and stop the gap becoming even bigger.