Howie, Kent & Co Rural Report - Spring 2024

THE RURAL REPORT

SPRING 2024

In this edition

Welcome to the Spring edition of Howie, Kent & Co’s Rural Report. After a wet and cold start to the year, we are all looking forward to a brighter and more prosperous season ahead.

In this issue, our Commercial Property Director Jon, talks us through key elements to navigating the shift in the commercial property market.

Sarah Thurmer gives her thoughts on what tenant trends she is seeing in the first part of the year, and we highlight some verified businesses looking for commercial space in East Anglia.

Finally, we wanted to showcase three properties we have successfully filled in the last 90 days. We would be interested to hear from you if you have anything similar on your premises.

Behind the scenes we continue to work on strategies and projects to make sure as commercial property agents we stay ahead of the field. We look forward to sharing our progress in the Summer edition of the Rural Report.

Rural Rental Market Update: Navigating the Shift

The past six months have seen a shift in the landscape of rural commercial property lettings. While the UK has seen a steady rise in commercial property rents nationally, reaching an average of £16.50 per sq ft according to the latest statistics; the latest figures from the Royal Institution of Chartered Surveyors (RICS) highlight a national slowdown in commercial property lettings. We believe we are now seeing this national slowdown at rural letting level. This can be attributed to two key factors: a slowdown in the overall economy and in our rural context, more units on the market.

The economic slowdown has naturally led to a decrease in demand for commercial space. Businesses are being more cautious with expansion plans, meaning fewer are actively seeking new workshops, storage facilities, or office space.

On the supply side, the poor drilling season last autumn coupled with the SFI non-farming area payments has had an unintended consequence for the rural commercial rental market. The additional area of spring crops and the SFI initiative has been a catalyst to reduce crop storage requirements, and has allowed the decommissioning of less practical farm buildings. These previously utilised sheds are now finding new life as rentable commercial spaces, adding to the existing pool of available properties.

Continued on Page 2

How can we help?

Howie, Kent & Co are here to help you navigate these changing market dynamics. We offer a comprehensive suite of services to assist rural landlords with all aspects of commercial property management, from tenant acquisition and rent negotiation to property maintenance and legal compliance.

Let's work together to ensure your rural commercial property remains a valuable asset, ready to capitalise on the inevitable upswing in demand.

Continued from Page 1

In addition to this the general poor returns from arable farming continue to force landowners to derive income from other avenues. Renting space continues to be a relatively simple passive proposition, provided the right tenant can be found.

Whilst the downward trend also applies to urban areas, it's worth noting that reducing rents alone won't necessarily solve the issue in the current climate. Demand, rather than price, is the key factor at play.

The important takeaway here is that this slowdown is not necessarily a pricing issue. Reducing rents might not automatically translate to a surge in interest. The current market climate dictates a wait-and-see approach from potential tenants.

However, there is a light at the end of the tunnel. A general election on the horizon often stimulates economic activity. This, in turn, could lead to a renewed demand for commercial space in rural areas.

In this transitional period, focusing on retaining good existing tenants becomes paramount. Building strong relationships with your current renters fosters a sense of loyalty and encourages them to stay put. After all, a reliable tenant is worth their weight in gold, especially in a softer market.

KEY STRATEGIES FOR RURAL LANDLORDS

RETAIN VALUE

Be cautious in reducing prices and undervaluing assets. In a market where demand is the key issue, price reductions will not necessarily stimulate interest, but will immediately devalue the product.

FOCUS ON RETAINING EXISTING TENANTS

In a softer market, keeping good tenants who are already familiar with your property is crucial. Open communication and a willingness to work collaboratively can go a long way.

EMBRACE THE CHANGING LANDSCAPE

SFI may create a temporary surplus of buildings, but it's also opened doors for new types of rural businesses Consider the potential for these spaces to be adapted for diversification projects or storage facilities for new agricultural ventures.

WHAT’S TRENDING IN 2024

As Jon has discussed on page one, a lean towards diversification amongst rural landlords has created a temporary (we hope!) surplus of buildings to let and with less tenants actively seeking, this in turn means there is more competition for those tenants who are. As we review calls and enquiries coming into our office we note the same features which consistently stand out as attractive to prospective tenants.

Understanding these features, and being ready with information to provide to potential tenants, is crucial for landlords looking to maximise occupancy rates and rental income.

FLEXIBLE SPACE

Commercial properties that offer flexible operating hours, adaptable layouts, and customisable features for example, potential to partition an internal office, are highly sought after. Tenants like to know there is potential to accommodate growth or reconfigure the building to suit changing needs without the hassle of relocating.

POWER REQUIREMENTS

Three phase power is important due to it’s higher power capacity and wider compatibility with equipment and machinery, lower energy bills over time, and potential scalability for businesses. Properties supplying three-phase power are better equipped to meet the demands of a wider range of potential tenants, making them far more attractive than those with only single-phase. Investing in higher power will allow landlords to future-proof their properties and make them easier to re-let to future tenants.

SECURITY

Modern tenants are a lot more security-conscious that they once were; and with more rural locations offering commercial properties, the ‘off the beaten track’ mentality does not hold as strong. Tenants want to know before even viewing sites that security systems will protect their business interests. This includes features such as an electric security gate at entrance, coded entry systems, or CCTV. Something as simple as knowing other tenants on site have been there long-term without problem is always received well by tenants.

ENERGY EFFICIENCY & SUSTAINABILITY

With growing awareness of environmental issues and cost-saving measures, tenants are starting to consider energy-efficient properties. Buildings with LED lighting, eco-friendly construction materials, insulated walls, absence of leaks/defects in building structure would not only reduce operating costs for tenants but also align with social responsibility targets. Despite this, cost is still key and both landlords and tenants will understandably continue to put their bottom line above environmental responsibility.

TECHNOLOGY

As tenants try to reduce costs and often consolidate office and storage spaces, technology now plays a crucial role in their search. Commercial properties equipped with technology infrastructure, including high-speed fibre broadband and sufficient power sockets throughout are highly desirable to tenants seeking hybrid commercial property options.

LEASE TERMS

As has long been the case, flexible lease terms continue to influence a tenant's future plans and their readiness to sign up to tenancies. Tenants are ever cautious of market instability and the effect of potential site-wide rent reviews on their ability to manage future costs. This means it is key to keep a balance between offering the option of both shorter and longer lease but also providing reassurance that if taking a longer lease, then rent will not be unreasonably hiked up within 12- 24 months.

SARAH THURMER

TENANTS ACTIVELY SEEKING COMMERCIAL PROPERTY

INFRASTRUCTURE FIRM

Minimum 2 acres yard space

In close proximity to London (outside M25)

24/7 access and plenty of movements of large vehicles

Tenant willing to pay up to £3/sqft

Excellent references available

MANUFACTURING COMPANY

5 – 7,500 sq ft warehouse

Small scale manufacturing/decanting and distribution of cement and resin based products

Staff on site 8-5pm Monday-Friday

Three-phase power, water, welfare for staff required 20 mile radius of Harlow/Epping

RECENTLY LET PROPERTIES

A snapshot of properties we have let to commercial tenants in the last 90 days. If you have a building similar to these that you are considering renting out, please get in touch with our team.

CARPENTRY FIRM

Two man carpentry workshop

Three-phase power required Maldon/Chelmsford and surrounds

Evening and weekend access until 8/9pm

No customers/no retail

TOTAL 60,000 SQFT - 3 WAREHOUSES WITH OFFICE TO A LOGISTICS COMPANY