2023 in review and our 2024 outlook

2023 Trends

Owner Occupiers putting down roots

We have seen a strong and continued level of sales to Owner Occupiers. Notable sales that have occurred and are near completion to owner occupiers are: 

- 24 St John Street, EC1M 4AY - 5,398 sq ft - Investment/Office

- Cask Works, 1-6 Stour Road, E3 2NT - 14,232 sq ft - Office

- 13-15 Dock Street, E1 8JN - 4,523 sq ft - Investment/Office

- The Billiard Factory, 443-449 Holloway Road, N7 6LJ - 3 Freehold warehouses

- Clock House, 149 Stamford Hill, N16 5LG - 10,272 sq ft - Investment/Office

- 39-45 Gransden Avenue, E8 3QA - 15,153 sq ft - Industrial/Office

- 1 Water Lane, E15 4NL - 5,580 sq ft - Office building 

Under 5,000 sq ft stock continues to move

We have seen the most demand from an office leasing perspective in the sub-5k market. In terms of sector, the primary demand has been from Creative and Media sectors, with professional services also making moves.

Plug and play is in demand

There is a strong bias towards tenants looking for fitted and furnished space. This is a trend that we see continuing and only getting stronger. Linked to this, we are seeing continued demand for flexibility in leases with the term certain / lease term reducing to sub-3 years and quite often at 18 months plus. Managed and serviced workspaces continue to increase in demand, and we have seen traditional/conventional landlords start to offer fitted and managed spaces to compete with the ever-increasing serviced office sector. 

Shift to turnkey solutions

The managed and serviced sector will continue to grow however, we will see an increase in more established businesses continuing to leave the managed/serviced sectors in search of conventional office accommodation. In order to attract such occupiers, landlords will have to offer flexibility in leases but, more importantly, offer a high-quality product that is ready to occupy. 

Remarkably resilient retail

Speaking on our core retail markets, which largely cover London villages and the City Fringe, we have noticed that despite levels of inflation and the rise in the cost of living, the retail sector remained resilient - particularly in the F&B, hair and beauty sectors. There has been a shift from the balance of demand from quality independents and newly emerging brands rather than established high street names. In many cases, rents are still below their pre-Covid levels, but levels of enquiries remain strong and we see little change happening in 2024.

2023 Highlights

Highlights include starting the year as being recognised as the most active disposal agents in both North & Northern Fringe and East & Eastern Fringe for a 3rd consecutive year by CoStar. More recently, on the sales side, we were recognised as the top occupational sales contributors in the London office market according to EG Radius YTD (15th Dec), with 5 of our agents named in the top 20 individual deal makers.

In a traditionally slow month of August, we were proud to sign 19 lettings - one of our strongest in recent years, followed by a great September of 14 transactions. 

We also continue to diversify the commercial experience across the commercial sectors, which has seen us transact to and advise on hotels, colleges, co-living, residential development, office blocks, nurseries & an IVF clinic. This includes some sizeable educational transactions up to 16,000 sq ft and securing 2 town centre office leasing instructions in Hackney Central totalling over 50,000 sq ft.

2024 Predictions

Opportunistic investors

Inflation seems to be receding fast in the US, EU & the UK, pointing towards an opportunity for central bankers to reduce interest rates in 2024. If this happens, we expect a resurgence in demand for long let investments and yields to broadly compress. 

It is well documented that 2023 has been a challenging year for the investment sector. Due to stabilising market conditions, such as base interest rates, we will see increased appetite from commercial investors looking to purchase competitively priced opportunities. In particular the office sector seems to be offering the most attractive yields as the market abounds with opportunities for those who believe in the long-term fundamentals of this bedrock asset class (which has suffered from Covid and remote working trends). It must be noted that the recent occupational trends point to the worst being in the rear-view mirror as occupancy rates rebound. Therefore, targeting best-in-class buildings in great locations is vital. In retail investments, we expect to continue benefiting from wider positive sentiment. 

While 2024 may continue to be impacted in terms of pricing if interest rates do not ease, there is no question that the pricing expectations of buyers and sellers are aligning. We foresee some significant value opportunities emerging through 2024.

Shift to turnkey solutions

The managed and serviced sector will continue to grow however, we will see an increase in more established businesses continuing to leave the managed/serviced sectors in search of conventional office accommodation. In order to attract such occupiers, landlords will have to offer flexibility in leases but, more importantly, offer a high-quality product that is ready to occupy. 

2023 Trends

Three phases of activity 

2023 was a year of three quarters. The first six months were filled with a reasonable level of enquiries, conversations, and some movement, with the market quietening in the Summer and picking up significantly towards the very end of the year. The trend suggests that occupiers' decisions are happening now, possibly due to interest rate stabilisation and the relative inertia of the past 18 months, which has triggered a call for action.

Creative sectors fuelling demand

Demand from traditional industrial occupiers, food production, waste, logistics has been the core drivers to the market this year, with non-traditional warehouse uses such as film studios and data centres also adding fuel to the market. Industrial units have become increasingly requested by the creative sectors, and the availability of premises suitable for creative use, the relatively cheaper rents and excellent transport links have all made east London a popular choice. 

Further movement outside of M25

Southeast and home county markets continue to benefit from businesses priced out of more central areas. We have helped on a number of acquisitions throughout the year, working closely with businesses to find new locations to keep occupational costs within budget.

Flight to quality for futureproofing

Prime industrial rents have continued to increase throughout the year, particularly in areas near or outside the M25. There has been a widening between prime and secondary rents, indicating higher demand for prime units with environmental and structural features that provide a space to cement their business for longer terms. 

2023 Highlights

We are proud to have started the year being recognised by CoStar as the 3rd most active Industrial Disposal Agent in London. As of 15th December, Strettons Industrial is currently ranked in 3rd place for Top Industrial Lettings Contributors in London by sq ft in the EGi Radius On Demand Rankings (January-15th Dec). EG also has 3 of our agents as top individual contributors in London industrial lettings - great work Ross Di-lirio, Harry Robins and Chris Wade!

This year, we've seen significant movement in larger industrial estates where we represent multiple units and successfully closed some key deals:

Lettings

- SEGRO Park Tottenham, N17 7RP - 25,222 sq ft - Industrial warehouse

- Rangemoor Industrial Estate, N15 4NE - 4,642 sq ft - Industrial warehouse

- 1A North Crescent, E16 4TG - 6,368 sq ft - Industrial warehouse

Sale

- 95 Lockfield Avenue, EN3 7PY - 13,112 sq ft - Industrial warehouse

2024 Predictions

The big question is, will this positive uptick in activity continue into 2024? Given the surge in demand this December and increased calls and viewings, we expect the first few months to be optimistic for the market; however, mid to late 2024 is still more of an unknown. 

Key industry data analysts are calling continued rental growth in some undersupplied prime locations. However, base rents from this growth are probably lower than predictions in comparison with mid-2022. 

There is no doubt industrial occupier activity, in all its typologies, will pick up as the wider economy stabilises in 2024 and 2025. Development and investment activity will, as ever, reflect interest rate changes.

2023 Trends

2023 has been another successful year for the auction team at Strettons. As we close our cycle and reflect on the year, we have continued to see a steady stream of enquiries, which suggests that even in the current market/economic conditions, property remains a popular asset class as long as pricing is realistic.

Steady demand for well-priced properties

This upward trajectory on properties sold at auction over the last few years is simply due to demand - plenty of buyers are looking for well-priced stock with an angle to add value. Alongside the rising success rates, many buyers have gained the confidence to purchase or invest in property through the auction method. 

Land lots find favour at auction

Some market sectors, particularly development sites, have continued to face more significant challenges. The increase in building costs has impacted the price developers are willing to pay for land, but again, we have seen some terrific results for land lots that are reasonably priced and in prime locations for development. 

New auction buyers entering the market

We always set out to make auctions more accessible to a wider audience of both buyers and sellers, and this year we noticed more calls from clients interested in the purchasing process. Likely a result of the overall market activity, it will be a trend to watch. With an ever-evolving demographic of buyers, the future is promising.

2023 Highlights

Lot 1 from our September 2023 auction at 227 Ilford Lane which was a shop and self-contained flat let entirely on one lease at £26,500 per annum with a rent review outstanding. We advised the seller to quote a Guide price of "£400,000 plus", and despite a significant number of enquiries/offers, the vendor resisted all temptation to sell prior and achieved £1.19m after a spectacular bidding war! In this case, auction was an effective and efficient mechanism of sale that enabled the seller to realise the best price possible on the day.

We had a busy year for marketing our auctions and getting as much interest in our offered lots as possible. We had 50 press placements across radio, print and digital in industry and national publications. We sent over 1 million emails to promote our lots and ensure bidding before, during and after each sale. Investing in SEO and PPC to drive more buyer interest, we also saw our auction website traffic increase 18% y/y.

2024 Predictions

As we move into 2024, we expect to see several properties coming to the market from lenders seeking to recover loan debt and property owners looking to realise cash. Both buyers and sellers will be looking to see what happens with inflation, interest rates, the economy and the general election. Hopefully, this will result in more confidence in the market.