UK industrial property sector weakens, research shows
29-06-2012
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In the first quarter of 2012 industrial and logistics take up in mainland UK totalled 17.7 million square feet, 24% lower than in the final quarter of 2011, while take up involving units from 1,000 to 99,999 square feet fell by 23%.
The reduction in take-up is partly attributable to a lack of quality choice in some markets, with some companies putting off decisions to take space rather than take poor quality stock.
Although demand fell, industrial floor space availability edged lower. At the end of March 2012, the total available supply of industrial and logistics floor space stood at 333.1 million square feet, down 0.6% on September 2011. Availability in units from 1,000 to 99,999 square feet, fell 1.9% over the same period.
The report also shows that at the end of March, 14% of available space was in new or refurbished units. And as of May 2012 speculative industrial development under construction stood at around 793,000 square feet across the UK.
Looking forward, Jones Lang LaSalle predicts that new and good quality supply could diminish this year, but the availability of poorer quality space could increase, particularly if the upward trend in company liquidations continues. Total industrial take up this year is likely to fall short of the level recorded in 2011, although if the economy gradually improves in the second half of the year demand should follow suit.
Prime rents are likely to be flat in most locations this year although a few locations, where good quality supply is tight, could see a modicum of growth. Park Royal in west London and the wider A40 corridor look likely to see some growth.
Also London and the South East will continue to attract the bulk of investor demand for multi let estates.
‘Given on going economic weakness and uncertainties it is unsurprising that occupier demand is subdued. However, because very little new industrial space has been developed over the past five years or so, many markets are now characterised by a lack of good quality accommodation. As a result, despite economic conditions, we think there is a case for speculative development in certain markets,’ said Jon Sleeman, director of industrial and logistics research at Jones Lang LaSalle.
Looking specifically at the South East market, Andy Harding, director of industrial and logistics at Jones Lang LaSalle said that this region continues to outperform the rest of the UK although take up has clearly slowed down in some specific corridors pulling down the overall performance.
he Western Corridor of the A3, M3, M4 and M40 still remains buoyant with good demand levels as does the north M25 and southern sections of the M1 and M11. In these areas there is an increasing ability for landlords to keep headline rents high and be firmer on incentives. Across the region Grade A space continues to be taken up at a good rate with very limited replacement through speculative development, which is of concern,’ he explained.
