Midlands shortage of medium industrial units driving up rents

Rental prices of medium-size industrial units Midlands – 35,000 to 50,000 sq ft – will continue to rise to close to, or above, £7 per sq ft by Spring 2018, according to KWB.

Kenny Allan, Director of KWB’s industrial agency team, says that increasing demand for these units and a lack of supply will see prices continue to rise.

Kenny Allan, Director of the industrial agency at KWB, pictured right, said: “Leasehold prices of these medium-size industrial and manufacturing units have been climbing steadily from around £4.95 per sq ft to £6.25-£6.50 per sq ft over the past three years. However, except in one or two very well established, key locations, it is still largely uneconomic for commercial property developers to build new industrial units of less than 100,000 sq ft.”

“Gap funding from some local authorities to give the developer an acceptable margin can help to get some industrial projects off the ground, but even where the local authority is keen to help, issues such as ground remediation costs can often have a negative impact.

“Capital values of medium-size units have increased, but bank valuations of freeholds are lagging behind owners’ and the market’s expectations, which means purchasers generally cannot obtain affordable mortgages, and cash buyers of sheds of more than 35,000 sq ft are very rare.

“Capital values will continue to increase on the back of the shortage of units, but it remains difficult to sell these units in a deal which involves vacant possession, given the complexities of gaining a commercial mortgage.

“So for businesses looking for new industrial premises to expand into, leasehold is really the only prospect, and the ongoing shortage will continue to push prices towards £7 per sq ft and above. However, for businesses requiring new or additional space, finding a suitable vacant unit remains the main problem in the present market.”

Good quality, well-located industrial units Midlands are in high demand, and short supply. KWB recommends that any companies with upcoming lease events, planned expansions or relocations, should consider their commercial property situation well in advance to avoid disappointment. As such, they should contact KWB’s industrial agency for advice on potential options, as soon as possible.

For further information about available Birmingham warehouses and other industrial units Midlands, contact Kenny Allan on 0121 233 2330 or email kallan@kwboffice.com.