THE ANNUAL GUIDE
TO INVESTMENT &
DEVELOPMENT IN KENT
Crises, economic turmoil and political uncertainty have hampered the property market over the last four years, accelerating change and impacting sectors with predictable and sometimes surprising outcomes. Are we moving towards calmer territory in 2025?
With a greater degree of business confidence than last year, the economy looks more positive. In September 2024, inflation stood at 1.7%, below the Bank of England’s 2% target for the first time, and a decrease from last September’s 6.7%.The current interest rate is 5%, just 0.25% lower than last year, with expectations of a reduction by the end of 2024.
Monthly real GDP in August was estimated at 0.2% (ONS) an improvement on zero growth in June or July 2024. Services output grew by 1% in August, production by 5% and construction by 4%. However, looking at the broader picture, GDP is estimated to have grown by 0.2% in the three months to August 2024
While Kent experienced minimal growth in business park rents this year, both Kings Hill and Crossways have seen substantial lettings, as have Chatham Maritime and Gillingham Business Park. Both Kent Science Park and Discovery Park continue to attract new science occupiers, and at Discovery Park, new tenants and existing tenants took about 15,000ft2 (1,394m2). Asymchem set up its new European Headquarters at the Park, taking more than 115,000ft2 (10,684m2) of space.
Subdued demand from occupiers has taken its toll on the office sector in 2023/4 and vacancy levels are high, though the market continues to slowly improve. While deals are picking up, they are smaller than in previous years. This year, the share of people working exclusively from home has fallen while the proportion of those working in the office remains relatively static. The ‘flight to quality’ continues, with Colliers reporting that Q2 2024 saw 76% of South East office space leased being of Grade A quality.
In the South East the largest office take-up this year was within the healthcare, pharma, and industrial sectors. In Kent, office rents average £12.50 per ft2, an increase of 2%, with some towns showing greater increases, such as Ashford 20%, Sittingbourne 6% and Medway 3%.
This year in Kent, once more, the industrial and distribution sector is expected to be the top-performing sector. Constrained supply of new space over the last 10 years has led to rising rents with vacancy rates nationwide dropping from 9.2% to 5.2%. Much of the demand in 2024 is for GradeA space with high levels of sustainability, and for speculative units over 400,000ft2 (37,161m2). Caxtons predict this will continue into 2025.
In some areas of Kent and the South East, there is still a shortage of available space despite ongoing construction, especially in the Maidstone/Aylesford and Sittingbourne areas. Demand in Kent is actually matching supply. Rents continue to rise, driven by lack of supply and lower rental levels compared to the South East. Maidstone and Medway in particular have seen significant rental growth this year, and other towns have shown smaller increases.
Kent is currently offering some of the largest speculative warehouses in the South East. Work recently began on the largest speculative property development in Kent in more than a decade, at Panattoni Park, Sittingbourne, where a total of 644,000ft2 (59,830m2) of development is under way on a site near Kemsley. The site will eventually offer a total of 773,000ft2 (71,814m2), on a 36a (14.6h) site.
After nearly a decade of slow and painful decline, the return of ‘bricks and mortar’ shopping and cheaper rents have led to a slightly better year for the retail sector. According to the Office for National Statistics, retail sales volumes are estimated to have risen by 1.0% in August 2024, following a rise of 0.7% in July 2024. Department stores and sports equipment stores reported a boost and stores such as Sainsbury’s, Aldi, Lidl, Marks and Spencer, and B&M are in expansion mode.
Food price inflation has reduced again with a year-on-year increase of 1.3% in August 2024 – the lowest annual rate since November 2021 (Statista). Despite this positive news, in June 2024, footfall across all retail destinations remained 1.0% lower than in June 2023 (ONS).
There have been significant closures including Ted Baker and Body Shop who between them closed five Kent stores. In Maidstone, the House of Fraser store is being refurbished to become a larger concept store of 65,000ft2 (6,037m2), and will reopen in autumn 2024. Tunbridge Wells will welcome Primark in the space vacated by BHS many years ago.
The town centre continues to move away from transactional to experiential, with services and hospitality continuing to succeed. Baker and Baristas for example took over the recently closed Patisserie Valerie on the High Street in Canterbury and have other outlets in Kent.
In town centres and on retail parks, Wilko stores are being reopened as Range and B&M stores and empty Argos stores are gradually being taken over. The opening of new discount food chains such as Aldi and Lidl, mainly at retail parks continues.
Turbulence in the UK housing market continued in early 2024 with high mortgage rates and rising building costs and the end of Help to Buy affecting confidence in the market, although build costs and mortgage rates across the summer have started to settle or reduce. Uncertainty and a squeeze on available cash have affected the price potential homebuyers are willing to pay.
UK house prices increased by 0.7% month on month in September and the annual rate of house price growth continued its upward trend with average prices up 3.2% year on year, compared with the 2.4% recorded in August, the fastest pace since November 2022 (2.8%) (Nationwide). Across the UK, Savills predict a 3% fall in house prices in 2024 but that prices will rise by about 20% between 2025 and 2028.
Land Registry figures show that prices in Kent, the South East, and England and Wales all reduced between 2.3% and 3.9% year on year. There was a very mixed picture in the areas of Kent, with Dover and Tunbridge Wells, Thanet and Sevenoaks all showing increases. Conversely, Canterbury, Gravesham and Medway saw decreases. House builders are building less homes across the UK.
The Investment Property Forum (IPF) consensus of independent forecasts shows a positive picture across all sectors for the period 2024 to 2028. The ‘all property’ returns show a predicted 7.6% increase compared with 5.5%last year with offices showing a 6% increase, industrial an increase from 7% to 8.5% but retail warehouse showing the highest increase at 9.3% compared to 7.2% last year.
In these early months of the new government it is hard to say what changes already underway, such as to the NPPF, local housebuilding targets, and the new Renters’ Rights Bill, and any announcements in the late autumn budget will make to the property and construction sectors. Notwithstanding this, industrial and distribution, office and business park yields all increased in 2024. With the Investment Property Forum forecasts showing improvement across all property sectors, and a better economic picture, key indicators suggest a more positive year for the Kent property industry going into 2025.
