An Agent's View

Colin Herman, Agency Partner, Kemsley Whiteley Ferris, offers us his thoughts on the current property market in Thames Gateway London:

Early in my agency career, I attended a marketing meeting and one of my colleagues advised the client that marketing is all about providing the right product and delivering the right message to the right person at the right time.  20-years later, I continue to tease my learned friend for this rather trite advice, but it is impossible to deny that it was correct.

Back in July 2005, the International Olympic Committee announced that London was the successful candidate for the 2012 Olympics. Whilst we were always in with a shout, I believe that the announcement took a lot of people by surprise. There was a sudden realisation that an enormous amount of work had to be done not only to acquire sufficient land through the Compulsory Purchase Order (CPO) process, but also to assist in locating up to 300 companies from the Stratford Olympic Zone to other areas.

Kemsley Whiteley & Ferris are one of the largest regional property consultancy practices in East London, Essex and the Thames Gateway. Accordingly, we were already experiencing a very active market, particularly in the industrial sector, as a result of its excellent location close to London, with excellent infrastructure and a gateway to Europe and beyond. The announcement of London 2012 has since provided a shot in the arm to that market and has increased demand levels. Whilst a number of major occupiers from Stratford have already relocated, there are still quite a number of small to medium size companies that need to conclude their relocations.

Demand
Companies of this size tend to leave their relocation to the last moment, but the clock is ticking. The first phase of CPO notices has meant that many occupiers need to have relocated by July 2007. We experienced an initial increase in enquiries, but this tailed off over the early part of this year. However, as this date gets ever nearer the pressure to act grows. There has been a noticeable increase in enquiries over the summer months, normally a quiet period in the agency market, and the second phase of notices is due to be sent in October. We are anticipating that there will be a similar increase in activity around this time.

Supply
Fortuitously, there are a number of industrial developments under construction which will be able to service this demand. For example, the London Development Agency is well underway with its joint venture with Rosemound and Beckton Waterfront providing a range of units from 5,000 to 120,000 sq ft. Practical completion is scheduled for Spring 2007 with a large printing company already having secured the largest unit, while reservations on the remainder are being taken very quickly. At the time of writing, the development is 83% under offer on a site that offers up to 400,000 sq ft.

Similarly, the smaller end of the market can be satisfied by Easter Park on Beam Reach 8, Rainham. Easter Developments are constructing 155,000 sq ft of units ranging from 2,700 to 20,000 sq ft,  25% of this scheme is already under offer. Smaller still is Ravenbourne's Own Your Own development at Dagenham Dock which has units from 1,000 to 2,000 sq ft with 30% under offer. This level of reservations is still unusual for developments of this size so early in the build process, as smaller companies normally commit to a new development towards the end of the construction process, when they can see what they are buying. Early reservations of this high level are therefore indicative of increased levels of demand. Practical completion for both these schemes is scheduled for January 2007.

Close to the Zone
It's not all about relocation from the Olympic Zone though. Think about all the companies that need to locate close to Stratford either because their business is there already or because they are servicing the construction process. Construction, transport, storage and distribution, food production and catering companies have all been contacting us, looking for all types of property and land. At a recent Olympic seminar I attended in Stratford, I was advised that construction workers munch their way through 30,000 portions of bacon and eggs everyday on the various Olympic building sites. Not surprisingly, all this demand for space has resulted in upward pressure on capital and rental values around this part of East London.

Another trend that we have identified is a shift in demand for freehold versus leasehold. A sustained period of relatively low interest rates has helped to fuel demand for freehold accommodation, even with the recent change. Many SME owners have taken this opportunity to buy the property they occupy and place it in their personal pension funds. This trend over the last 3-4 years has created a shortage in good quality freehold property, and as this supply of freeholds has diminished, companies have been forced back into the letting market.

For example, we have recently let a number of units at Thamesview Business Centre in Rainham for Brixton Estates. The estate was developed in the early 1990's and remained vacant for much of that decade. Having found its feet by 2000, Brixton bought the estate from Industrious last year at which point there were 5 vacant units. The estate is now nearly fully let and rentals have risen from £7.50 to £8.50 per sq ft, very similar to rentals for new build industrial units.

Regeneration
Irrespective of the Olympic effect, the Thames Gateway Region was already a thriving business region. The LDA and GTL have been at the forefront of regenerating land that would otherwise remain redundant and attracting new businesses into the area. A good example of this is Beam Reach, which offers industrial development land along the A13 corridor in Dagenham and Rainham. Beam Reach 8 has already attracted Wincanton Records Management to a 90,000 sq ft facility and Ruskim Seafoods to a 20,000 sq ft building which is on the Easter Park site, referred to earlier, which is under construction.

Similarly, Beam Reach 5 which fronts the A13 on land previously owned by Ford Motor Company, offers up to 88 acres of prime industrial land. Although too early to name names, detailed discussions are taking place on nearly all of the available plots and development activity is anticipated shortly.

Referring back to the advice given to a client over 20-years ago, it is clear that in a fast changing world, there are still some things that never change. We are in the right location, providing the right product to the right occupiers at the right time.

Colin can be contacted on:
Email:  cbherman@kwf.co.uk
Web: www.kwf.co.uk