Strong showing for office and industrial markets

A new report by agents Innes England has suggested that Derby’s office and industrial property markets are both performing strongly.

The firm’s latest Market Insite report, which is an annual review of the region’s commercial property market, Derby’s office sector “performed strongly”.

It said that 2022 saw just over 200,000 sq ft of lettings, with smaller lettings accounting for 75% of the year’s activity.

Meanwhile, Innes England said that industrial take-up in Derby continued to accelerate in 2022, with a total of 1.2 million sq ft of space acquired; the second highest take-up on record.

The report said that the city’s key employment sites performed well, with Hello Fresh acquiring space at the specialist 155-acre food production and distribution campus Smart Parc SEGRO Derby.

Elsewhere, St. Modwen Logistics let 200,000 sq ft of new build Grade A at St. Modwen Park Derby, while to the south of the city, Infinity Park  Derby is welcoming the new Nuclear AMRC facility.

Innes England also observed that prime rents had moved to a new record level of £8.50 per sq ft and have now risen by 41.7% over the past five years.

Secondary rents have almost doubled over the period, rising by 84.6% to £6 per sq ft.

The study found that total investment in Derbyshire in 2022 was just over £300 million, slightly down on the previous year but still 26% up on the five-year rolling average.

Industrial investment dominated in Derby – up more than a third up at £243 million.

Overall, the Market Insite report found that total investment in the East Midlands was £1.356 billion in 2022.

This was significantly down on the previous year’s record-breaking volume – and was caused by factors such as economic uncertainty in the second half of the year.

However, experts at Innes England believe the East Midlands market could be set to bounce back this year.

Ben Robinson, head of the company’s investment consultancy, said: “As we begin 2023, we are cautiously optimistic that despite the re-rating of commercial property yields at the end of last year, transaction activity will return as investors quickly become acclimatised to the new norm.

“Strong investor momentum started to fade in the second half of the year as the market began to absorb the effects of the first significant rises in interest rates since the financial crisis, before falling away sharply following the further shock of ‘Trussonomics’.

“As the era of cheap money came to a rather abrupt end towards the latter part of the year many investors adopted a wait-and-see approach while commercial property yields re-rated across all sectors.

“However, we expect the market to recover following a quiet start to the year as investors look to take the opportunities of a thinner market while it lasts.”