The commercial property market is often reduced to a handful of questions. Are investors confident? Are rents rising? Which sectors are performing best? And is there enough economic certainty for businesses to commit to new premises?
Those questions matter, but they only tell part of the story.
From our experience across the North of England, one significant trend is the growing divide between commercial properties that meet the expectations of today’s occupiers and investors, and those that do not.
Increasingly, the difference comes down to location, quality, suitability and value.
Not all commercial property is created equally
The North East has a diverse commercial property market, from city-centre offices and industrial estates to high street premises, rural business space and smaller properties serving local communities.
Each has its own dynamics.
A well-located industrial unit with good access and scope for growth may attract strong interest, while an older property with restricted access or limited flexibility can struggle, even when the two are relatively close together.
The same applies to retail. Two units on the same high street can have very different prospects depending on their configuration, condition, frontage, lease terms and neighbouring businesses.
As Paul Fairlamb, Senior Associate Director and Commercial Chartered Surveyor at youngsRPS, explains: “We’re increasingly seeing that the headline market statistics don’t tell the full story. Two properties in the same sector and even the same location can perform very differently. The fundamentals of the individual asset are becoming increasingly important.”
Location and quality still matter
Technology has changed how businesses operate, but it has not diminished the importance of location.
For an occupier, the right location can influence customer access, staff recruitment, logistics and operating costs. For an investor, it can determine the depth of the potential occupier market and prospects for maintaining demand.
Quality is equally important, although that does not necessarily mean a new building.
A property needs to work for the business using it. For one occupier, that might mean loading and storage facilities; for another, an attractive working environment or prominent retail frontage.
Energy efficiency and running costs are also becoming increasingly relevant as businesses look more closely at overheads.
The question for landlords is straightforward: how competitive is the property compared with the alternatives available locally?
Looking beyond the headline yield
The same principle applies to investment.
A headline yield may look attractive, but it is only part of the equation. Tenant strength, lease terms, condition, location, future rental prospects and potential capital expenditure all need to be considered.
“The headline yield is only the starting point,” says Fairlamb. “The quality of the income, the strength of the tenant, the lease terms and the future prospects of the property all need to be considered.”
That can create opportunities in secondary property.
An older building may have an outdated specification but an excellent location, while a property requiring investment may have genuine potential to be repositioned for a particular occupier.
But opportunity needs to be realistic. Planning, refurbishment costs, local demand and the likely end user all need to stack up.
Understanding what occupiers want
Ultimately, commercial property works best when the building and the business are well matched.
What type of businesses are looking for space? What do they need from their premises? What are they prepared to pay?
These questions are difficult to answer from national statistics alone. They require local knowledge and conversations with businesses, landlords and investors.
That is where regional expertise can add real value. Newcastle, Northumberland, the Tyne Valley and North Yorkshire each have their own commercial dynamics, and individual towns can behave very differently from the wider market.
Looking beyond the headlines
The most important commercial property trend may therefore be less about a particular sector and more about polarisation.
Properties offering the right combination of location, quality, suitability and value are likely to remain competitive. Those that fail to meet occupier or investor expectations may face greater challenges.
That does not mean every prime property will succeed or every secondary property will struggle.
It means the detail matters.
For businesses, landlords and investors considering their next move, understanding that detail can make the difference between simply finding a property and finding the right one.
Thinking about your next commercial property move?
The youngsRPS commercial property team works with businesses, landlords and investors across the North of England, with offices in Hexham, Newcastle and Northallerton. Whether you are looking to acquire, sell, let, lease or review a commercial property, speak to the youngsRPS team for a local perspective.
www.youngsrps.com