2006 Forecast

The forecast for commercial property is positive for 2006. The demand for investment properties continues at a high level, with more buyers than sellers seeking commercial property investment opportunities. With so much money available, and the banks continuing to increase their lending to the commercial property sector, the yield compression has continued and with interest rates forecast to fall, this is likely to continue into 2006.

Lending to the commercial property sector improved by 50% in the first half of 2005, amounting to some £30 billion. The banks willingness to lend on income producing property will continue.

Occupier demand remains at a good level, the demand for industrial property exceeding that for offices, but this may change during 2006.

We predict that prime yields will fall by 25 points during the early part of the year from the current level of offices 5.75%, retail 5%, industrial 6%.

Rents will improve during 2006 with prime offices in Coventry increasing by 10% to £17.50 sq ft, industrial by 5% to £6.00 sq ft, with little movement in retail.

The Chancellor, in his pre-budget speech, created a shock to the market by excluding the benefits of putting residential property into SIPPS. However, there remain considerable benefits for placing commercial properties in a SIPP, although the amount that can be borrowed against the assets of the pensions fund is reduced from 75%-50% after 6 April 2006.

There has been considerable activity in this market, particularly from Directors who are placing property in a SIPP and leasing back to their own companies.

Successes in 2005

D&P Holt have enjoyed a buoyant year with major sales, lettings and acquisitions, notably:

ProLogis Park, Coventry - 226,000 sq ft letting to Gefco.

ProLogis Park, Coventry - 71,000 sq ft warehouse sale to Barsan.

Copthall House, Station Square, Coventry – investment acquisition for overseas client £9.25 million.

2 Eaton Road, Coventry – office block investment (£5 million plus).

Cyan Park, Coventry – acquisition of 7.2 acre industrial development site. Works have commenced with first completions mid 2006.

Kenilworth Garage, Crackley, Kenilworth - acquisition of residential development site (£2.5 million plus).

Riley Court, University of Warwick Science Park, Coventry – office lettings.

Millburn House, University of Warwick Science Park, Coventry - sale of 50,000 sq ft office/industrial building.

Coventry Tubes site and premises, Binley, Coventry – sale of 43,000 sq ft industrial building.

Site acquisition for a number of major mixed use developments in Coventry and Warwickshire.

Kings House, Bedworth – 24,000 sq ft office block building to Warwickshire County Council, on behalf of retained property management clients.

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