Demand for industrial unit remains high in the UK

Demand for large industrial space remains resilient, according to GVA‘s latest Industrial Intelligence - National Review

Commercial property on Newcastle's Quayside
Commercial property on Newcastle's Quayside

Demand for large industrial space remains resilient, according to GVA‘s latest Industrial Intelligence – National Review. The review confirms that demand for take-up of industrial property more than 100,000 sq ft during 2012 totalled 25m sq ft in Britain, which compares to 27m sq ft in 2011.

In 2012 take-up of units in excess of 50,000 sq ft in the North East totalled 2.6m sq ft. The corresponding take up in the first half of 2013 totals 780,000sq ft.

Occupier activity was led by retailers although their share was down on the previous two years. There was an increase in demand from manufacturers, particularly the automotive sector and their supply chains.

Design and build has provided the predominant form of supply of new buildings and this is likely to continue through 2013.

Selective speculative development will continue on smaller buildings in prime locations along with a very modest return to big shed speculative development.

A healthy level of requirements in the market suggests a positive outlook for demand through 2013 and beyond. Headline rents have shown little change over the past year in prime locations, although rent free periods are beginning to recede.

Occupiers and landlords have continued to demonstrate adaptability in getting deals done.

The North West has maintained a strong level of activity for the fourth year, while Yorkshire and the North East also maintained a good level of activity. Market activity in the Midlands has picked up strongly, whilst the reverse was the case in the South East.

There has been increased activity from manufacturers throughout 2012 and the first half of 2013. The automotive sector in the North West, North East and West Midlands has seen increased activity from companies such as Jaguar Land Rover, Vauxhall and Nissan and their respective supply chains. Aside from retailers and manufacturing, third party logistics firms provide a significant share of occupier demand.

The subdued occupational market and withdrawal of funding over the last three years has caused a dramatic reduction in development activity.

The limited new development will see supply shortages of prime stock begin to feed through, reducing vacancies and causing stronger rental growth.

Pre-lets continue to be a key driver of take-up throughout 2013. Although speculative development of small and medium sized units is becoming increasingly justified in certain locations, the persisting problems of viability, liquidity and achieving acceptable loan-to-value ratios makes it difficult.

Perhaps the most encouraging sign here in the North East is the commitment to new speculative development both north and south of the Tyne, backed by funding support from the European Regional Development Fund and the Growing Places Fund through the North East Local Enterprise Partnership.

Hellens Investments have started work on one industrial scheme and are due to start on another in the region. At Teal Farm, Washington they are constructing a 2nd terrace of speculative industrial units totalling 19,000 sq ft, the first terrace having completed in 2008.

The scheme will comprise four units, three at 4,000 sq ft with the fourth unit being 7,000 sq ft.

At West Chirton North, North Shields work is due to commence on the construction of 17 industrial units individually ranging in size from 1,500 sq ft to 2,970 sq ft. The scheme comprises 34,310 sq ft and units can be combined to provide up to 7,000 sq ft.

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