Despite the market’s best endeavours to produce as much new Midlands industrial and warehousing stock as possible, supply still falls short of the current insatiable demand.
There are as many pre-lets occurring as there are lettings of new buildings. Whilst some occupiers require a specific type of building that would preclude them from taking an existing building, the majority of transactions have had to pursue the design and build route because the type and grade of available stock is not sufficient for their purposes.
Key design and build transactions
Screwfix – 562,000 sq ft, Prologis Park, Fradley
Sainsbury’s – 325,000 sq ft, Prologis Park, Northampton
Palletforce – 260,000 sq ft, Burton-on-Trent
Amethyst – 210,000 sq ft, Wellesbourne Distribution Park
Dwell – 151,000 sq ft, Prologis Park, Milton Keynes
Birlea Furniture – 74,000 sq ft at East Midlands Distribution Centre, Castle Donington
We may see yields soften in some areas. This will not be on prime stock, as there are only so many prime distribution locations in the country, and these will continue to attract really strong yields. Perhaps, the slightly secondary markets will soften by a quarter to half a point. There is no lack of appetite for prime investments.
Smaller stock is thin on the ground
On the smaller side of the market, in the multi-let industrial estates, the only real availability of buildings is coming from those occupiers who were acquiring space c. 2011. These occupiers have enjoyed the last 5 years on really advantageous terms – due to where the property market was at, at time of signing the lease. They are now facing lease renewals with rent increases of 30-50%. As a result, some of these units are coming back to market and are snapped up as soon as they become available.
2017 outlook for industrial space
As the recession caused the time lag in development, it is likely that it will take up to a further 3 years for the supply to come back. As such, we anticipate the next 12 months will see a continuation in rate of take-up, and with that, continued rental increase, as well as a reduction in incentives.
For more information
Download KWB Office and Industrial Market Review 2016.
For more information on Midlands industrial space, please contact Kenny Allan on 0121 212 5996 or email firstname.lastname@example.org.