Investment in booming city retail sector soars

THE DERBY commercial property market of 2023 witnessed a notable shift as the retail sector emerged as the dominant force, capturing nearly two-thirds of market activity.

Despite facing challenges such as high interest rates and geopolitical uncertainty, the retail sector surged ahead, showcasing a remarkable resilience in the face of adversity.

This reversal in fortunes saw retail investment soar by a staggering 420 per cent, reflecting an enticing prospect for cash-ready investors enticed by attractive pricing levels.

The findings, revealed in Innes England’s Market Insite report, illustrate that whilst retail flourished, the industrial sector experienced a significant downturn, with investment dropping by 90 per cent compared to the previous year.

Office space, too, struggled to maintain its momentum, although there was a notable increase in takeup within the 5-10,000 sq ft size bracket. The landscape of commercial property in Derbyshire was further diversified by the resilience of the “alternatives” sector, which continued to attract investment despite market headwinds, buoyed by strong demographic trends.

In 2023, Derby’s commercial property market witnessed significant developments across various sectors. One of the standout developments was the resurgence of retail, with notable investments and refurbishments in key retail spaces such as Derbion.

Major brands setting up shop in Derbion underscored the city’s appeal as a prime retail destination, whilst substantial refurbishments highlighted ongoing efforts to enhance the overall shopping experience.

Additionally, the industrial sector saw a surge in sustainability-focused developments, reflecting a growing emphasis on environmental considerations among occupiers. This trend led to a rise in demand for highquality, eco-friendly industrial spaces, with projects like St Modwen Park driving the next phase of Grade A new build stock forward.

Ben Robinson, Innes England director and head of investment, said: “It’s fair to say that the UK market in 2023 was relatively challenging, with transaction volumes down across the board – testing levels not seen since 2012.

“The strong headwinds of high interest rates translating to high borrowing costs, inflationary pressures and geopolitical uncertainty have caused many investors to slow down or pause decisions to buy and sell.” Comparing the year-on-year and five-year average, the total turnover in Derbyshire was down 55 per cent and 45 per cent respectively. Ben said: “In a reversal from previous years, it was the retail sector which dominated market activity, surpassing industrial for the first time since 2019, accounting for almost two thirds of the market share. “On the flip side, the industrial sector suffered a significant drop and reached only £20.6m, 90 per cent down on the previous year’s albeit record volume and 80 percent down on the fiveyear average.“

In Derbyshire’s dynamic commercial property market of 2023, notable transactions showcased the region’s economic vigour. Key deals included the £18.5 million acquisition of the B&Q property in Derby by US investment trust Realty Income Corporation. Starboard Hotels’ purchase of

Derby Riverlights for £14.4 million, with a net yield of ten percent, highlighted the appeal of leisure assets.

HelloFresh also secured a significant 430,000 sq ft distribution facility in Spondon, whilst St Modwen Park saw notable occupancies and a new 145,000 sq ft pre-let.

Sam Hall, associate director at Innes England, discussed the retail landscape in Derby and the causes for optimism. He said: “In Derby, it’s Derbion that remains a primary destination in the city centre, with multiple household name brands opening there. Likewise, illustrating the confidence in the market the city has, we can see that the food terrace has undergone a £2m refurbishment, with a further £3m refurbishment being undertaken by other operators in the mall. This is just one part of the Derbion masterplan for Derby’s overall regeneration.”

Citing positive trends, he added: “National retail vacancy rates across high streets, shopping centres, and retail parks have hit their lowest levels since the first half of 2021 at 13.27 per cent nationally and 15 per cent in the East Midlands. Likewise, online spending figures have remained consistent averaging at 25 per cent. As a result, national and regional chains are re-rationalising portfolios, and independents taking advantage of the rebased rent.”

In Derby it’s Derbion that remains a primary destination with household name brands opening. Sam Hall