Sale and leaseback offers new opportunities

Berrys

1st November 2019

Developing Northamptonshire

Berrys

By Simon Parsons

Berrys

SALE and leaseback is on the increase in the commercial property market offering opportunities for businesses and property investors alike.

The commercial property market has thrived despite Brexit uncertainty with the industrial/warehouse market showing the greatest rental and capital growth within the commercial sector.

New bespoke/speculative development continues to be strong particularly for institutional buyers but the investment market is seeing a levelling of yields for second-hand stock.

The weakened export and trade market, especially in manufacturing, caused by Brexit and reduced business investment has enabled the Bank of England base rates to remain steady at 0.75 per cent.

But this could change according to Simon Parsons, head of Commercial Agency at Berrys.

"Slow manufacturing output and trading has resulted in business supply excess, which once Brexit is understood, should result in increased trade and take up," said Simon, who is based at the Kettering office of Berrys.

"The Bank of England believes that this extra activity will require increased interest rates to control inflation. The speed of these increases will depend on the type of Brexit, more gradual if smooth Brexit, or quicker if a no deal Brexit."

Weak business investment is backing up due to Brexit and the global trade conditions but the labour market is still tight, suggesting lack of labour supply and little movement of labour.

"Predicted business growth coupled with price peaks in the industrial property sector offers owner occupiers opportunity to release capital by way of sale and leaseback," said Simon.

He says two approaches are available:

* Longer term investment lock-in where the owner-occupier sells subject to a longer-term lease, say 15 years certain. This will be attractive for institutional buyers and buildings need to be modern.

* Shorter term development route. The owner occupier locks in for three to five years with the view they are going to relocate. The investor offers flexible occupation and retains the ability to carry out alterations without consent.

"If you are considering sale and leaseback, please contact Berrys as we are able to assist owner occupiers and identify investors."

Simon Parsons can be contacted at the Kettering office of Berrys on 01536 213169 or email simon.parsons@berrys.uk.com

Berrys