By Rob Haigh, Agency

At the beginning of this year, I was asked by to make a few predictions for 2018, and one of those was my conviction that residential developers will continue to focus on the conversion of redundant upper floor space in to flats and student accommodation in Nottingham over the course of the year.

That said, I think that by the close of the year, this market will become saturated, and whilst remaining active, the number of opportunities will diminish. Reactive developers will be quick to turn their focus to the conversion and improvement of office accommodation in 2019 to exploit the lack of quality accommodation available at competitive rents within the city.

The last year has seen a large number of student accommodation opportunities within the city; both new-build and conversion-led, including the £11.5m development of 222 apartments at Laceworks beside the railway station, the conversion of the six-storey multi-let Archer House office block into a 177-room scheme and the conversion of Norwich Union House in South parade into 88 studio rooms.

Whilst there is a high level of demand from developers at present, such is the level of activity, it is arguable that supply will begin to outweigh demand for these spaces within a relatively short space of time.

Weigh that up against the current office market in the city – which is typified by a steady, active demand, but a lack of good quality stock – and the next wave of investment and development becomes clear.

Where there is good stock available, there is an active demand on both an occupier and investment basis, with Siemens taking on a 31,000 sq ft new office in Central Park, Homeserve taking on 30,000 sq ft at Aspect Business Park, Euro Property Investments completing the purchase of 1 Standard Court, Park Row and, perhaps pre-empting the demand, entrepreneur Andrew Springhall selling part of his city portfolio to Hockley Developments.

Industry bible CoStar currently lists over 500,0000 sq ft of office space to let within two miles of the city centre, with 80 per cent of it having been available for over a year. However, the true figure is likely to be far less; mutli-let properties often have varying levels of space available, resulting in constant marketing of a site.

With three key reasons for a property remaining available for a long period of time; lack of occupier demand, over-valued property or sub-standard specification, developers are beginning to consider the reason for vacancy rates. Whilst occupier demand is clearly not the problem, the lack of available Grade A and B space, and a reluctance to speculatively create it, is.

Ken Nettleship, of Invest In Nottingham agrees: “Invest In Nottingham currently has a very active pipeline of businesses interested in locating or expanding their business in Nottingham. Whilst there are several great opportunities for companies looking for new office space in the city, there is still space that doesn’t meet the demand of the modern occupier.

Some of the recent speculative refurbishments at Royal Standard Place, Fothergill House and Canalside House are encouraging and we would hope to see more examples of this coming on to the market over the next year.

“We would also hope to see some new developments coming out of the ground in 2018/19 to help to meet the growing demand for high-quality space in Nottingham”

The lack of availability is pushing rents upwards and with demand squeezed yet further by the lack of suitable Grade B opportunities coming to market as well, developers have two clear calls to action – recognising the demand and creating speculative developments to fulfil it, or the somewhat more economical and safer solution of refurbishing and upgrading office space to provide a specification suitable for the modern business, at a competitive rent.

As supply outstrips demand in the residential conversion market, I very much hope – as I’m sure do plenty of eager would-be occupiers in the region – that developers will begin to seek alternative opportunities to invest in and improve the city centre, with the office market crying out for some innovation and investment.