REASONS TO BE CHEERFUL ……..ISH!
Crystal ball gazing into what the commercial property market holds in store is impossible right now.
The main frustration is that no two people can agree on how far into a recession we are or, in some deluded quarters, are we actually in a recession at all?
Historically, in property terms, a recession has heralded a big drop in property values and prices……… so – we’re in a recession then?
Er……..no – whilst the number of property deals are down compared to this time last year, values appear to be holding up and in fact some upward movement in rental values has been seen recently, which is not altogether surprising as more businesses switch to leasing from purchasing freehold.
Mmm……. Wel,l every other recent recession has also been characterised by vast tracts of empty property creating a nasty problem of over-supply which, in turn, then depresses values further.
Well, not this time – or not yet anyway.
As a result of a prudent approach adopted by those developers who have been speculatively building in Derby, there is indeed very little good quality commercial accommodation currently sitting empty. With more and more businesses choosing to sit on what they’ve got, a big imbalance between over-supply linked to weak demand is not yet pulling us down.
Indeed, it is interesting to read letters to the DET in response to announcements about new office developments, which bemoan the fact that why should more office space be developed when there are loads and loads of offices already empty. That, quite simply, is not true. In the last proper recession of the early 1990’s, substantial office complexes such as St Peter’s House on Gower Street and East Gate House on Nottingham Road were empty – amounting to over a quarter of a million square feet in just those two buildings done.
So what’s the crystal ball telling us then? Well, values are holding up and there is demand, which is evidenced by deals still taking place.
Any other reasons to be cheerful? Well, the City of Derby is not standing still. A large number of big towns and small cities similar to Derby in terms of size have seen their development programmes virtually knocked down overnight. Schemes are being cancelled and, in some case, Receivers are being brought in to try and heave partially completed developments over some kind of finishing line.
That’s where Derby seems to be bucking the trend. Putting aside any pro-regeneration spin, it’s hard to argue with the facts. Tower cranes are up still in the city centre and work is under way on the much maligned Riverside site, and spectacularly under way on the site at the former Bridge Gate BMW Dealership which in 12 months will be home to Jury’s Inn.
Word has it that the transformation of the City Hospital, at over £350m, is going to finish early and within budget. Closer to home, Derby College and their team remain on track to deliver a stunning transformation of the Roundhouse early in 2009.
Even QUAD is opening – to the seasoned readers of the DET that seemed the equivalent of an Everest type of challenge two years ago!
I’m not for a moment suggesting that Derby is immune from all of the ailments afflicting the commercial property market right now, but there certainly is a degree of resilience about the place and I can only hope that that resilience is carried through as we head into winter and into 2009.
The crystal ball may clear sooner and reveal Derby County’s fate at the end of the season but wait a minute………… it’s gone all foggy again!
