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.