Market Sentiment Report

SW Wales CommercialProperty & DevelopmentSeptember 2020 WWW.BP2PROPERTY.COM

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MARKET SENTIMENT: GENERAL MARKET CONDITIONS

• BP2 has not witnessed the level of transactions which were being experienced in Q1 2020, but we are encouraged by the level of market activity as the lockdown restrictions caused by Covid-19 begin to ease.

• Technological advances have acted as a catalyst for an entirely new working environment, the effects of which are not yet known, but will impact upon all sectors of both the property market and society in general.

• Whilst 40% of respondents to the BP2 Sentiment survey were negatively affected by the Covid-19 pandemic, over 50% have a generally positive outlook for the next 5 years.

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MARKET SENTIMENT: GENERAL MARKET CONDITIONS

• The general outlook from local Professionals within the Industry is that whilst the recent pandemic will have a short term negative impact, we will witness a recovery to normal levels over the medium term.

• With an expectation that interest rates are due to fall even further, Commercial Property will continue to be seen as an attractive investment.

• Residential and Industrial are seen as the next growth sectors in the SW Wales economy.

• Whilst we approach the new ‘post-Covid’ era with cautious optimism, the Public Sector will have an increasingly important role to facilitate the improvement of market activity.

MARKET SENTIMENT: SECTOR SPECIFIC

RETAIL- Tenant defaults are beginning to have a

significant and visible effect, in both town centre and retail park locations

- Secondary and Tertiary locations are the worst affected in terms of vacancy

- The widely held view amongst local professionals is that the retailmarket is broken, and requiressome form of governmentintervention

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MARKET SENTIMENT: SECTOR SPECIFIC

A3 / LEISURE- A number of national chains have entered

administration due to Covid-19

- Rent concessions, rent reductions, rates holidays and other incentives are hastily being agreed in order for occupiers to continue to trade solvently

- Further closures are expected as businesses adapt to the newguidelines

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MARKET SENTIMENT: SECTOR SPECIFIC

OFFICE- Technology and Working from Home is already

impacting the office market as larger occupiers are rationalising their space requirements

- Local market activity has increased , with total occupational costs at the forefront of occupier’s priorities

- A severe shortage of local Grade A stock will hold back market activity over the forthcoming years

- We are expecting an extension of flexible working practices which will result in offices increasingly being used as meeting spacesas opposed to the traditional ‘individualdesk’ arrangement which has becomethe norm.

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MARKET SENTIMENT: SECTOR SPECIFIC

INDUSTRIAL- Online shopping is creating a boom in the

logistics sector; with same day delivery becoming increasingly important, it is expected that Industrial demand will increase

- Rental growth is both expected and necessary in order to solve the current ‘gap’ between cost and value of new build developments

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MARKET SENTIMENT: SECTOR SPECIFIC

INVESTMENT- The underlying fundamentals of covenant

strength, lease term and building location have recently become even more important for a more discerning investor

- Rental yields are increasingly more polarised; well-let prime stock has increased in value whereassecondary stock has fallen.

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MARKET SENTIMENT: THE ROLE OF THE GOVERNMENT

One of the major responses to our market sentiment survey was that the Government / Public Sector / Local Authority have an increasingly important role in shaping future policies around a number of key areas:

• BUSINESS RATES• The creation of a ‘fairer ’

system which more accurately reflects profitability of business and market conditions, including re-assessing empty rates liability.

• THE PLANNING SYSTEM• Generally viewed as overly complicated

and very time consuming.• Potential to widen permitted use

classes within town centres so that current occupier demand can easily be accommodated.

MARKET SENTIMENT: THE ROLE OF THE GOVERNMENT

• TAXATION• Creation of a ‘fairer ’ tax calculation and collection system, which

incentivises UK Investment.

• SME HOUSEBUILDERS• Incentives provided to assist SME Housebuilders as they can become a

key catalyst to increase housebuilding numbers

• ‘SUPPORTER’ vs ‘COMPETITOR’• The public sector is often seen as competing with the the private

sector, as opposed to being a ‘facilitator ’, which has become a barrier to investment.

• TURNOVER BASED RENTS• Potential legislation to look at a turnover based rental system,

particularly in the A3 / Leisure sector.

MEET THE TEAMSet up by David Blyth & Roger Poolman in 2015, we identified an opportunity to provide specialist, bespoke advice to a range of clients in various sectors.

David Blyth MA BSc Hons MRICSSpecialist in:• Identification & Delivery of Commercial and

Residential Development opportunities• Strategic Portfolio Advice• Asset Management• Acquisition Advice

Experienced as a Development Manager & Commercial Agency Surveyor in Chester, Cardiff & Swansea with 15 years Industry experience.

Roger Poolman FRICS Specialist in:• Disposal of Commercial Land and Buildings• Residential Development• Public Sector Estates Advice• LPA Receivership• Commercial Investment Advice

45 years Industry Experience across regional property markets, including appointment as Deputy Chair of Swansea Building Society.

PROPERTY SECTOR

- Commercial Investment- Office - Retail- Industrial/Trade - Leisure- Residential Land

LEASEADVISORY

`

ACQUISITION

DISPOSAL(SALE/LETTING)

AGENCY

Detailed Land/Building SearchDirect ApproachesOff-market KnowledgeOptions AnalysisLDP Analysis

Detailed Inspection Market OverviewMarket Value ReportDesign/Refurbishment AdviceOccupier Demand Analysis

Rent ReviewLease RenewalLease Re-gear

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WHAT WE DO: AGENCY / LEASE ADVISORY

RESIDENTIAL

COMMERCIAL

DEVELOPMENTADVISORYSERVICES

Options AnalysisDevelopment AppraisalsFeasibility StudiesPlanning AssistanceDesign RecommendationsFunding AdviceGrant Application AssistanceOccupier / Purchaser DemandMarket Overview ReportsResidual Value CalculationsLand Use StudiesAcquisition Advice / Bid Writing

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WHAT WE DO: DEVELOPMENT ADVICE

CASE STUDY

Strategic Advice : Coastal Housing Commercial Portfolio• BP2 Commissioned to provide Strategic Asset Management

Advice • Portfolio of c.100 commercial units across various sectors

throughout SW Wales

• Disposal advice and market feedback, detailed refurbishment programme undertaken, lease advisory

• Reduced vacancy rate from c.40% to <10%

• Increased gross rental income by over 30%• Extended AWULT by over 2 years• Assisted in achieving ‘regeneration aims’

of the client in Swansea High Street

<10%Vacancy

Rate

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30%INCREASED

RENTAL INCOME

CASE STUDY

Estates Advice : Dyfed Powys Police• Retained Estates Advisor to Dyfed Powys Police across their

entire portfolio• Carried out a rationalisation programme in 2017, disposing of

6 redundant stations

• Provision of acquisition advice for new site developments throughout the entire geographical area.

• General Strategic advice provided across the portfolio, including Options analysis of various buildings and landholdings.

• Notable recent disposal of the Friars Park Station in Carmarthen to Lidl Foodstores.

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CASE STUDY

Strategic Advice : Private Sector Development ProjectsClient: Nextcolour• Turtle Bay, Swansea• New development at Nells Point, Barry• Loungers, Guildhall Sq, Carmarthen• Jackson’s Lane, Carmarthen

Client: Aspect Developments • Development of portfolio of Co-Operative Foodstores• Mixed use Retail Park, Llandeilo• Domino’s, Neyland

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CASE STUDY

Strategic Advice : Private Sector Development ProjectsClient: Sylfaen• Aldi foodstore, Gorseinon• Trade Park, New Cut Road, Swansea

Client: NJC Developments• 600 Student Bed development, SA1• 450 Student Bed Development, Kingsway

Client: Uzmaston Projects• Frederick House, Haverfordwest

Client: BJ Group• Matrix Park, Swansea

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CASE STUDY

Strategic Advice : Picton Yard, Swansea

GRADE AOFFICE SPACE

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40,000SQ FT

COMMERCIALFLOORSPACE

• Introduction to client to acquire the former Woolworths Building on Oxford Street in Swansea City Centre

• Investment Acquisition advice provided - building let to Poundland with potential to convert upper floors for residential use

• Provision of market advice relating to commercial design for landmark central Swansea scheme.

• Mixed use development to include up to 40,000sq ft of commercial floorspace, providing Grade A office space and ground floor retail/cafe

• Assistance with additional land acquisition and grant/funding application

CASE STUDY

Residential Land Disposal: Private Landowner

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• Approached by a private landowner to advice on the potential for development of a 5-acre site in Pennard

• Site situated outside of settlement limits. Put forward the case to include it as part of the new rural exception policy

• The policy allowed for 51% affordable Housing, supported by open market dwellings.

• Market tested the site, carried out a ‘best bids’ process, and structured a sale agreement on a package basis between Waterstone Homes (Jehu Group) and an affordable housing operator.

• Planning was agreed in 2019, and the sale completed shortly thereafter.

CLIENTS WE WORK WITH

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CLIENTS WE WORK WITH

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TESTIMONIAL

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Coastal has worked with BP2 pretty much since they were established. They have helped support our regeneration work, and offer clear, succinct advice on the variety of issues we have been working with them on. The team is always professional, very engaged and client focused.

Gareth Davies, Director of Development,Coastal Housing

TESTIMONIAL

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I have worked with and known David andRoger for many years and find them utterly trustworthy and professional in all that they do. I would have no hesitation in recommending them to others, and often do!

Carwyn Davies, DirectorHacer Developments

TESTIMONIAL

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We share a number of clients with BP2 and have worked with Roger and David on numerous transactions since BP2’s inception. The BP2 team are friendly, approachable and professional. Their detailed market knowledge and refreshingly commercial approach means that they are able to achieve the right deal for clients in a market which at times can be challenging.

David Palmer, DirectorMorgan La Roche

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