The capital’s high street has ‘a better story to tell’ than its counterparts in most towns in the north of England, according to a doyen of the island’s real estate market.
‘We complain about the retailers that we have but Douglas still has a pretty good offering in terms of multiple traders,’ says Mark Grace, commercial director at Black Grace Cowley.
He also believes Strand Street is suffering fewer
vacancies than equivalent size towns in the UK. He
contends that the perception that Douglas is losing an
inordinate number of
retailers was seeded when
the Woolworths outlet shutdown along with hundreds of others in the UK after
the group went into administration in 2008. The hole left by Woolworths was later in effect filled by the arrival of Dealz.
‘The reality is that those multiple traders [who look
beyond the island’s demographics to open branches here] do very well,’ Mr Grace told Business News.
‘We are doing deals. In the last quarter of 2013 we let three shops in Strand Street, including to a multiple tenant, Cotton Traders.
‘I don’t think we are ever going to attract the super high-quality, luxury goods retailers but I don’t think the retail story is nearly as bad as some make it out to be.’
He says the facelift Douglas is continuing to undergo is paying dividends.
‘With continuing effort, I think the occupation level in Strand Street will remain pretty good. It is harder to attract [multiple traders] to Castletown, Ramsey and Peel. So we mainly look to
local traders when shops come up in those areas, but
. . . there is absolutely nothing wrong with that.’
Mr Grace says that retail rentals across the board in the island have remained reasonably stable since the global financial crisis struck in 2008/09.
‘The top rate is just over £100sq ft for zone-A, which it has been throughout the last five to six-year period. In most high streets in the UK you’d have seen some quite significant fall off.’
In fact, the entire commercial property market in the island has remained fairly stable in the past few years, according to Mr Grace.
‘Commercial property was on a year-on-year improving trajectory right up to 2007-08. We weren’t hit immediately when the UK property market started to suffer.’
The island’s residential property market has borne the brunt of the decline in sales. ‘We talk about the commercial market as a whole but it has a number of dynamics. And even within the different sectors you have submarkets.
‘Even in the last two to three years, when people’s perception was probably that things are pretty slow, we’ve had two speculative office buildings coming out of the ground - St George’s Tower and Quay House. Probably nowhere in the UK, outside of London, have you seen speculative office development, people willing to take the risk to develop. Quay House is full and there are tenants in St George’s Tower.’
Mr Grace says that rental rates and freehold prices have remained fairly constant.
‘What has improved are the sort of incentives that tenants can get in the office market - a tenant might now be able to get double the rent-free period than he would have been able to get in 2007-08.’
Landlords of prime office space in Douglas can charge around £22.50 per square foot.
‘We’ve kept pretty well on a par with northern cities. Where we have fallen away is in terms of the Channel
Islands [where] rents are well up in the £30s. But hopefully that makes the island more attractive as a location.’
Mr Grace says the Isle of Man was fortunate in that there were no large-scale
developments under construction when the effects of the global crisis hit the island.
He calculates that around 10 per cent of the island’s one million square feet of office space is now standing empty. ‘It will probably take 12 months for the bit of slack that we do have to be taken up. The incentives that tenants are getting at the moment will probably disappear and we may well then see some new schemes coming on to the market. There is the very real possibility that we will see some growth in rents over the next few years to around the mid-£20s.’
He had closed a rental deal for 3,000 sq ft the day before we met for the interview. However, anyone seeking in excess of 10,000 square feet at the moment would be hard pressed to find it. While banks are contracting, companies in some other sectors are expanding, feeding the need for additional floor space.
‘One of the mainstays of our business for the past two to three years has been the investment market,’ notes Mr Grace.
‘We completed £20 million of investment sales in the last quarter of 2013. We’ve had consistent [investment] sales over the last five years.’
He describes the investors’ appetite for commercial property as a ‘flight to income returns’, in the face of poor interest rates on offer by the banks. Commercial property is achieving returns of 7-9 per cent.
Within the warehouse market there is not much vacant space to be found. Rentals - around £7.50 sq ft is being achieved at the top end - have remained constant.
‘We’ve just done a major pre-let down in Tromode, - probably the largest pre-let industrial premises, 18,000 sq feet, that there’s been in the island in the past 20 years.’
There is keen demand for 1,000sq ft unit.
Mr Grace is hopeful that the government’s ambitions to establish a cluster of biomed manufacturers in the island will be realised.
‘It’s still early days but it certainly seems promising - a niche market like that would be wonderful for the island.
‘It doesn’t take a lot in the commercial market in the
island to make a big difference. Whether it’s the office, the industrial or the retail market, it only takes half a dozen deals to completely change the outlook.’