The commercial property market in the Midlands is locked in a perfect storm; the current lack of new build development due to high build costs and subdued rents is clashing against stronger-than-ever demand for property from tenants across all sectors.
Something’s got to give, and it may be a surprise to some landlords that occupiers looking for good quality premises are more than happy to pay market rents if they find the right building.
On the other side of the coin, the current investment market is very hot, with investors outnumbering available properties to buy – a situation which is driving down yields.
In order to provide an alternative, we have been advising our clients to purchase vacant properties in need of refurbishment, and invest in refurbishing them to bring them back to a more appealing condition.
Why should investors do this? We have found that tenants will always opt to take a refurbished property as it minimises exposure to their own property expenditure in the short term.
For an investor, refurbishment also offers potential to achieve rental growth by adding tangible value.
This isn’t an absratct theory; recently we advised clients to buy three vacant units, all of which were refurbished and are now let or about to become fully-let. They units were purchased at a significant discount to investment value taking into account the void holding period, refurbishment costs and rent-free periods.
It is this ‘who dares wins’ attitude that, at present, is the way forward. Until speculative development returns in any volume then investors and landlords can quell the storm for businesses looking to grow into bigger and better premises.
