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Is the property market in Lancashire and Cumbria on the road to prosperity?

Millions of pounds are flowing into major regeneration schemes, with towns and cities across Lancashire and Cumbria seeing significant investment in commercial and residential property developments.

The counties are also benefitting from private and public initiatives such as Preston’s City Deal, which will deliver nearly £1 billion for ambitious infrastructure upgrades to open up commercial development on strategic sites. Meanwhile, the Heysham Link Road is taking shape, creating new development opportunities for industrial and logistics parks, while Cumbria’s Energy Coast is  expected to drive a long term, multi-billion pound investment programme. However, the regional property market is not without challenges in some sectors.

in:brief talks to the region’s property experts and lifts the lid on how the commercial property market is faring…

Regional hot spots are driving the market

John Marrow, regional property manager at property investment and development company Northern Trust, oversees a portfolio of industrial and office sites that stretches from Cheshire to the Scottish border, giving him a broad perspective of the Lancashire and Cumbria market.

“The west coast of Cumbria is especially buoyant at the moment,” said John. “We have a number of SME sites in that area, comprising industrial units of 500 sq ft to 5,000 sq ft, which are almost 100 per cent occupied. There is strong demand – and when we do have vacancies, they are quickly filled. A good example is our Clay Flats industrial estate in Workington, which has proved popular, attracting major national clients and trade operators, such as Greggs the bakers and Howdens Joinery.”

Andy Taylorson, a director at chartered surveyors Eckersley, believes the 65-acre Cuerden Strategic Site at the end of the M65 will be of huge benefit to the area as it is expected to create up to 2,500 jobs through a mix of commerce, industrial and leisure developments.

“If you get commitment from blue chip organisations who will be anchor tenants, there’ll be immediate kudos for the scheme that will in turn attract other businesses creating a significant ripple effect,” commented Andy. “But before that can happen we need to put the infrastructure in place, to upgrade the area and resolve the planning related issues, so it will take some time to crystallise.”

Andy also cites the Heysham Link Road, connecting the port to the motorway network, as key infrastructure that will generate industrial, distribution and warehousing space demand capable of attracting traffic away from Stranraer and Holyhead and bringing logistical investment into the region.

Another hotspot is Lytham’s residential property market, which has improved significantly over the past 15 months, with increased activity and higher sales prices. “Buyers now feel more confident in the sustainability of these levels and we think this confidence is sustainable against a background of continuing low interest rates, pension fund releases, and a stable political environment,” said Peter Whitehead, managing director at Lytham-based property investor and developer Windmill Group.

Varying fortunes in commercial property sectors

Industrial space is among the top performers in the commercial market, according to an expert in Commercial Property at Napthens.

“Industrial property has done well in the recession due to a lack of supply, which is why areas with a strong stock, like Skelmersdale, are prospering,” said the expert.

His view is endorsed by Ian Taylor at accountancy and business advisory firm Baker Tilly, who cites a shortage of industrial space across the board, but especially in the SME sector.

“There hasn’t been much industrial property building going on as a result of restricted finance from the banks and these restrictions don’t look like disappearing any time soon. Finance for speculative builds will still be very difficult to get,” said Ian.

Another key sector is tourism and leisure, which is seeing exponential growth in areas such as the Lake District.

Martin Davis, director at hotel and leisure property agents Christie & Co, reports a 17.2 per cent rise in the average value of properties sold in 2014, compared to the previous 12 months. Even more encouragingly, Martin expects this trend to continue in 2015 and beyond.

“The first quarter of 2015 has been at the highest level that we have seen in the regional hotel and licensed leisure sector since the peak of 2007,” said Martin. “The market is strong, even in less affluent areas, and we recently sold two hotels in Blackpool, with a third transaction looking likely to complete soon.”

This positive outlook is supported by Andy Taylorson: “Sustained economic growth and increase in wages means more disposable income and there is a clear pattern of people eating out more,” he said.

“The market for large family pub and restaurant chains is particularly buoyant and should continue in line with the economy.”

In an expert’s view, the top-end of the office market is also thriving, along with out-of-town retail space. “There is demand for quality office accommodation, preferably with car parking, but anything that is not first class is having to be discounted,” said the expert. “High street retailers have continued to suffer against competition from online traders, though out-of-town developments seem to be performing strongly.”

Some areas, such as Lytham, are seeing significantly greater demand for office space, largely due to improved economic conditions. “Many landlords now have waiting lists for both start-up and mature businesses’ requirements,” commented Peter Whitehead. “In the retail sector, there is little space available and it is notable that recognised brand names are now more prevalent in Lytham alongside further new openings of cafes, bars and restaurants by local operators.”

The market for small industrial units is especially active

Commentators agree that likely demand for large or small commercial property is mainly determined by the availability of stock.

“Although we have some larger units up to 60,000 sq ft, our main focus is supporting the SME market through expansion and relocation by providing a range of unit sizes,” said John Marrow. “These are 500 sq ft to 5,000 sq ft units for the entrepreneurial sector and with the introduction of our ‘Innovate’ office brand means we can divide larger suites to suit individual requirements.”

Major schemes are making a difference

Cumbria’s Energy Coast is having a huge impact on development and is a key driver of growth and jobs. An estimated £90 billion is being spent there in the next 20 years, creating massive potential. “Although the Energy Coast is geared up for Sellafield, we are benefiting from tenants operating in the substantial and constantly growing supply chain.” said John Marrow.

One of Lancashire’s main advantages is the motorway network and big projects such as the Heysham Link Road are already enhancing efficient road links. Meanwhile, improvements flowing from the Preston City Deal will lead to better traffic flow in and out of the city, which will increase its attractiveness as a business location.

Ian Taylor does not shy away from addressing the controversial subject of fracking. “It’s the elephant in the room,” he said. “It could be transformative, driving massive change and bringing a lot of money into the local economy. But it is a sensitive issue and the environmental and economic benefits will have to be balanced carefully.”

Another politically divisive – but potentially beneficial – future development is the HS2 rail link between London and the North West.

“Political sensitivities notwithstanding, HS2 will be especially good for this region because it will deliver more people much more quickly into our tourism and leisure sector,” said Martin Davis.

“Visitors may not be taking two week holidays, but they are increasingly opting for short breaks and faster, more efficient transport can only boost this area of growth.”

On a less contentious theme, an expert points to the Hollinwood Homes residential development in Blackpool’s Rigby Road as a gamechanger for residents.

“The town has suffered from appalling housing stock and Hollinwood has been bold enough to invest, which is hugely improving the availability of good quality housing for local people.”

Attracting greater investment and businesses to the region

Turning to the future, Andy Taylorson is convinced that streamline the planning system would be a massive boost for the broader property industry.

“Currently it takes too long, costs too much, and there is excessive technical detail. We are wrapping ourselves up in red tape when it should be quick and easy. If you want investment and jobs and family homes, you have to make the planning process much more efficient,” said Andy.

An expert believes local authorities and regional marketing organisations must produce effective and engaging campaigns to promote their areas.

“Of course big infrastructure projects are vital, but you must also make the most of what you have and communicate this through great PR and marketing strategies,” he said.

Commentators agree that efficient transport infrastructure and top class amenities will attract good business, which will in turn generate investment.

“It’s a chicken and egg situation,” said Ian Taylor. “The ideal situation is to create a virtuous circle where all these elements are working together to create greater prosperity for everyone.

“When the economy improves, property is usually the first stepping stone and with property development come wider benefits. Once we get the supply/demand balance right, I think we can look forward to a bright future,” added Ian.