Midlands industrial market research: 2017 annual review

The West Midlands industrial market continues to thrive

In 2017, rents in the Midlands industrial market were on the increase, spurred on by strong demand and real lack of supply. However, due to this lack of supply, the take-up fell short of 2016, which was an exceptionally strong year.

The industrial and warehousing market is crying out for new stock, but there are constant barriers put in place prohibiting development.

There should be a push at Government level to free up land. It is obviously very contentious to consider developing green belt land for warehousing and manufacturing uses. However, when there are no other deliverable options, this must be considered, as this situation will soon start costing jobs.

Lack of multi-let new build schemes

As in 2016, the availability issue in the Midlands industrial market is most prominent for industrial SMEs. Numerous estates are fully let and have been for some time. Many large industrial funds are reporting that their void rates are lower than 3%. Whilst having a well let portfolio is envious, having such a low void rate restricts opportunities to let your current tenants grow within your ownership.

Unfortunately, this is unlikely to improve for this area of the market, with less than a handful of multi-tenanted industrial developments under construction.

Occupiers are being sold short by this lack of stock. It is having a negative impact on many businesses as they are not able to grow efficiently under one roof. Medium-sized companies are not having the opportunity to upgrade to new bigger units, and this is then not freeing up the smaller side of the market to allow newer businesses to flourish.

Rising rental values

For those companies that can find new larger premises, the shortage of units continues to push up rents. We expect that rent of new Midlands’ medium-sized industrial units – 35,000 sq ft to 50,000 sq ft – will continue to rise above £7 per sq ft in the next few months. Some better-quality units at the smaller end of the market are already in excess of £8 per sq ft.

Strong occupier demand, rising rents and a shortage of both good quality industrial buildings and sites, mean that capital and land values will continue to rise too.

Key industrial transactions

Occupier Location  Sq ft
XPO Supply Chain Bonehill Road, Tamworth

645,000

Gardman DC9 Apex Park, Daventry 414,051
Beko Birch Coppice, Tamworth 345,000
Eddie Stobart Unit 2 Mountpark Bardon, Coalville, M1 J22

317,585

Amazon RG2 Segro Logistics Park, East Midlands Gateway 290,000
Palletline Crossflow 180, Siskin Parkway, Coventry 186,522
DHL RG3 Segro Logistics Park, East Midlands Gateway 180,000
DHL Mothercare Access 18, Danes Way, Daventry 140,474
Salts Healthcare Apollo, Advanced Manufacturing Hub, Birmingham 95,013
Hellmann Worldwide Logistics BG87 Burton Gateway 87,716

Notable speculative developments

Occupier Location  Sq ft
Prologis (4 units) Prologis Park Hams Hall

886,990

IM Properties (5 units) Connexion, Blythe Valley Park, Solihull 209,000
Ropemaker Properties Kingpin Industrial Park, Tyseley, Birmingham 188,025
London Metric Unit 2 Campbell Road, Stoke

140,000

Griffen Units 4 & 5 WDP 40, Coventry 51,500–118,000
First Pannatoni Birmingham 100, Walsall Road, Birmingham 100,000
Mountpark Logistics EU Sarl Mountpark Bardon, Coalville, M1 J22 63,650
Trebor Developments (let agreed) Airfield 55, Aldridge 55,693
Barberry Developments Walsall Road, Birmingham 46,000
Aberdeen Asset Management 40K Birch Coppice, Tamworth 40,622

Outlook for 2018

The so-called ‘Big Box’ market – 100,000+ sq ft – appears healthy, with deals for more than 8 million sq ft expected to complete in the first quarter of 2018. This is being driven, in part, by the demand for well-located logistics operations to support the rise of the online consumer.

The challenge, and opportunity, for 2018 will continue to be the lack of available new build stock. This is throughout the size ranges from 1,500 sq ft to 300,000 sq ft. Some occupiers simply do not have the luxury of being able to wait for a design and build unit. The majority of occupiers of buildings sub 50,000 sq ft need to be able to stand inside the building to get a better understanding of the developer’s offering. Without speculative construction, they are simply not able to do so.

The region needs more new industrial and warehousing buildings.

“Speculative developments such as the £26 million industrial and distribution scheme ‘Connexion’ at Blythe Valley Park as well as the 16 acre Prologis Park development at Junction 6, M42, show clear signs of investor confidence.

“Our future plans for growth and development across the Borough of Solihull – ‘UK Central’ – are well underway, with West Midlands Combined Authority Devolution Deal packages to deliver infrastructure across the HS2 Interchange and UK Central Hub area. 

“IM Properties’ vision for Blythe Valley Park is also moving forward at pace – creating a mixed-use offer with 750 homes alongside offices, industrial and leisure space – creating something not witnessed outside of the South East and unique to the Midlands.”

– Anne Brereton, Director of Managed Growth, Solihull Metropolitan Borough Council

For more information

For more information, please contact Kenny Allan on 0121 233 2330 or email kallan@kwboffice.com.

Download KWB Office and Industrial Market Review 2017.

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Contact Kenny Allan

0121 233 2330