Expect no rental growth in Norwich’s retail market for at least 12 months, say agents. The opening of Capital Shopping Centre’s Chapelfield shopping centre last September has left the high street littered with vacant units.
Yet it is Chapelfield that agents voice most concern about. “Chapelfield doesn’t seem that busy. It has reduced its opening hours and cut the cost of car-parking,” says one.
Adrian Fennell, retail partner at Roche, says: “Chapelfield clearly needs time to bed down. Norwich is overshopped, and we have a year’s supply to mop up.” He believes Gentlemen’s Walk, which attracts zone A rents of £220 per sq ft, will remain the prime pitch. “Next year, Gentlemen’s Walk will start to creep up, but Chapelfield will remain the same,” he says. Caroline Morton at Savills agrees: “The market will probably take 18 months to recover, and that will give Chapelfield two years to settle down,” she says.
However, CSC says it is on track to hit its annual footfall target of 10m, and that zone A rents are £225 per sq ft. CSC asset management director Caroline Kirby says: “Chapelfield is doing exactly what we expected it to do.”
Elle and Silverscreen, which had units in the centre, have gone into administration, but Kirby says: “We’ve still got a few units to let. Three are in solicitors’ hands, two of which are well-known high-street names new to Norwich.”
Local department store Jarrold has removed one source of worry, announcing it will take the former River Island unit on London Street for its sports store, Pilch, and a new menswear store.
Castle Mall also appears to have weathered the storm. Fennell says zone A rents at the centre are £135 per sq ft. “This relates to a good secondary street, but there is too much space available for this to go up,” he says.
Out of town, Targetfollow expects to submit a “hybrid” planning application by the end of the year for 400,000 sq ft of retail and leisure at the former Bally shoe factory, a
21-acre site on Hall Road. It hopes to be on site in the next year, with completion scheduled for 2008.
Further afield, in Great Yarmouth, Miller Developments and Centenary Investments have applied for consent for a 55,000 sq ft extension to the 155,000 sq ft Market Gates shopping centre. The £18.5m project will help boost rents “substantially” above the town’s average zone A of £80 per sq ft, says Fennell.
At last, city-centre development is on the horizon. The refurbishment of 44 and 46 Rose Lane will be the first scheme to deliver speculative offices into the city-centre market for the past 10 years, adding two units of just under 4,000 sq ft each.
This will be followed by the more substantial 32,000 sq ft at Lawrence House in St Andrews, and Targetfollow’s 135,000 sq ft scheme on Duke Street, which is set to come on to the market in spring 2009.
Jarrold’s Whitefriars site, which could provide 250,000 sq ft, is also in the pipeline, and two prelets totalling 70,000 sq ft rumoured to be to Defra and a local professional firm are believed to be imminent.
William Jones, partner in business space at Bidwells, which is agent on the scheme, says the deals will give the developer confidence to proceed with the next 40,000 sq ft.
Development, says Jones, will help redress the rental imbalance between the city centre and out of town. “Top speculative business park offices are approaching £15 per sq ft. The highest quoting rents in the city centre are £13.50 per sq ft,” he says.
Targetfollow certainly believes this will be the case. Development director Julian Wells says it hopes to secure several prelets at its Duke Street scheme. “Norwich is now sufficiently strong and is due a rental pick-up,” he says. “We will be targeting £17.50 per sq ft for the early prelets.”
That said, nearly 75% of the 138,000 sq ft taken up in the first half of this year was out of town, and the most significant transaction in the first half was at Broadland Business park, where Norwich Union took a 60,000 sq ft office. James Allen, partner at Roche, says the market is “patchy” but that £1 per sq ft rental growth over the year can be expected.
Take-up in the county’s industrial sector has been healthy so far this year. Figures were boosted by one of the largest prelets on the Norwich market for some time a 75,000 sq ft prelet to corporate information provider Williams Lea at the Gateway 11 Park, Wymondham.
This performance is unlikely to be repeated in the second half, however, and Bidwells’ Jones expects take-up for the year to end at a more average 400,000 sq ft.
Savills’ Morton says demand has been good but he is cautious. “Stock is short, mainly because development land is limited,” he says.
Yet even those companies with development land seem reluctant to start building. James Allen of Roche which is agent on Link 47, an 11-acre development site on Longwater business park says there are no plans to build speculatively immediately.
“Rental levels need to be reliably higher,” he says. “They are now at £6 per sq ft, and they need to have established a trend of £7 per sq ft or more before developers would be confident enough to move forward.”
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Investment has suffered from the uncertain retail environment in Norwich. Roger Yates, investment partner at Bidwells, says: “People seem unwilling to pay current yields until the whole thing shakes down.” Offices and industrial are a different story, remaining strong with three-quarters of a point already knocked off yields of 7% last year. With investors changing their preference for industrial units and paying more interest in regional offices, Yates says the yield gap between the two is disappearing. That is not to say demand for industrial units is weakening. Yates points to a facility put on the market for £9.75m. It boasted an 11-year income and a 6-acre development site. “We got seven bids and they were all over £10m, which reflects the market. The institutions may be sitting back but there is plenty of other money coming in.” Across the sectors, Yates predicts yields will flatten over the next year. |
