Whenever a market has more empty space than "normal" it is said to be oversupplied. But a close reading of Andrew Leatham's article indicates that Hull's central business district is clearly not oversupplied. Oversupply only has real meaning when there is no demand for available space. Yet it is clear that there is demand. It is just that this demand is being diverted to the peripheral business parks at rents pretty much the same as those quoted for quality space in the town centre. Secondary space languishes not because there's too much of it, but because it is the wrong type of space.
Specifically, it is space with no parking. The market is not so much oversupplied as 'wrong-supplied'. What may be perfectly decent offices fail to let because they are not matching demand, not because the demand isn't there. After a while, if local agent Nick Pearce's comment is any guide, they fail to attract enquiries. As all agent's know, image sticks.
Another example: There is a legend (which I rather hope is true) that a leading developer offered the agent on a hard to let west London building a tenants perspective. The agent promptly replied 'No thanks. I've had two hundred tenant perspectives.' Even allowing for a little agents hyperbole, any building that attracts that level of enquiry is clearly not part of oversupply. Perhaps the building is wrong. Perhaps the rent is wrong, but the potential demand was clearly there. Again, it is wrong supply.
We all know stories of buildings that won awards back in the 1960s and 1970s but that are now unlettable monoliths often in the middle of urban wastelands. Once perfectly suited to unsophisticated (or just plain desperate) tenant demand, now they are all too often lumped into the general vacancy statistics, despite having as much relationship to a modern office building as a Model T Ford to a Mondeo.
Agents have always known that the prospects of any building are a subtle combination of being the right product in the right location at the right time and price. Yet the statistics that we gather all to often treat offices as undifferentiated boxes, using only the crudest sub-divisions. The same, by and large, applies to retail and industrial space. And as long as we continue to do this we will continue to talk blithely of "over-supply" when what we really need is a more sophisticated understanding of the supply-demand dynamic.
So perhaps its time for property analysts, researchers and forecasters to rediscover that agency truth. Property is a uniquely difficult product to build and market. Requirements change, sometime dramatically but often subtly over time. It is not enough to ask if there are too many or too few buildings. It is time to ask if we have the right type of building.
© 1994 Ian Cundell
Originally published in modified form in Estates Times