NW 2015: Step forward developers
The next 12 months will be another period of strong growth for the region, particularly Manchester, even if the low-hanging fruit has gone, predicts David Lathwood.
With a lot of money still looking for a home and Manchester remaining the second preference for investors looking outside of London then more and more deals are likely.
The volume of investment transactions our team handled this year doubled in value on 2013, which itself was nearly twice 2012's levels. There is no doubt that the market is back.
An election throws up a degree of uncertainty, for sure. A Labour win or majority would lead to a sharp intake of breath, but if the Tories win and an EU referendum is on the cards the business world will worry about this too.
But these things won't slow the appetite for assets and the economy has enough momentum to continue to encourage investors and occupiers to remain active.
The challenge the property community faces is a lack of new stock. We face a situation where the demand for available investment grade assets will soon outstrip supply, if we haven't already done so. Buildings that changed hands 12 or 18 months ago will do so again.
Lack of space is an issue for occupiers too. Regional markets are not like London in that they don't rely on the 100,000 sq ft plus lettings to keep things ticking over. You can count the number of these in the North West in the past 10 years with your fingers.
It's the 5,000 sq ft-ers that keep the region's agents busy and its occupiers churning over, but the availability of good stock is drying up.
Step forward the developers. While office and investment agency teams will have to fight hard for their share of deals next year, developers will be very active. Expect a good 12 months for the North West's planning and development teams.
The usual lag between the market picking up and shovels in the ground is coming to an end and we will see many more cranes on the region's skyline next year.
For some, the lag has been a little longer than expected but the issue has been cash. The banks, a mainstay of development financing in the pre-2007 era, are now unable to provide large development loans straight off their balance sheets. However, other players are now entering the arena.
But it won't just be in offices where we can expect more activity. The North West's housing shortage is as acute as it is elsewhere. We expect house prices to rise by 3.5% in the North West next year, which compares to just 1.5% in central London. In hotspots like Manchester city centre this amount should be even more.
So while agency life will be a little bit harder in 2015 the development pipeline will begin to bear more fruit.
David Lathwood is lead director for JLL in the North West.
Don’t see why a Labour gov would result in a sharp intake in breath. Any moves away from current economic orthodoxy in favour of measures that reduce the massive inequalities we see in society today has got to be good for both the economy and wider society. The number of reports by respected think tanks that link high levels of inequality with a poorer performing economy are stacking up now. Any institution that invests for long term sustainable returns should actually benefit from policy that moves us away from the prevailing culture of short termism which has characterised UK and US economic policy for decades now.
By RYB
There is always a sharp intake of breath if Labour get in power, but in my experience, the property market always does OK as Labour hose money at incentives to try and ‘re-balance’ the economy from one geography to another. Labour are also more closely associated with high inflation, which in the short term, is a good thing for property speculation. It is of course a bad thing for the economy. It never works of course, but the property guys make a killing along the way. I don’t think that is the point though, the ‘sharp intake of breath’ will be due to fears that labour will again ruin the economy and plunge the Country further into serious debt. Who knows, maybe Labour will get it right for once, they have been trying since the end of WW2, so surely they will succeed sometime soon? Whether Ed Miliband has got what it takes is more than debatable.
By BobD
I was with you until the ‘Labour wrecked the economy’ trope which is a claim that stands up to no serious scrutiny. As we know, the crash was almost entirely down to greed, sharp practice and incompetence within the banking sector that caused the global financial crisis, the economic recession and resulting deficit. And a wider culture of short termism of which the property sector is as culpable as any other sector.
By RYB