The lack of grade A industrial space across Yorkshire has led to a slow-down in overall take-up, with the reduction of stock leading to a fall in investment volumes of 18%, according to research by national property consultancy, Lambert Smith Hampton (LSH).
Drop in industrial investment volumes
In a review of the first half of 2013, results showed that that total industrial investment across Yorkshire and the North East stood at £69.59m, compared to £85m in H1 2012.
Notable transactions included Tritax’s purchase of The Range at Nimbus Park in Doncaster for £37m, a UK investor’s purchase of Maplin Distribution Warehouse at Brookfields Park in Rotherham for £11.5m and Valad Europe’s purchase of the Micheldever Unit at Lowfields Business Park in Leeds for £5.57m.
Rapidly diminishing supply of space for smaller occupiers
Despite a good supply of large, grade A warehouse and logistics facilities over 100,000 sq ft in the region, LSH has calculated that there is less than one month’s supply left of the traditionally more sought after smaller sheds.
Rob Whatmuff, Director and Regional Head of Industrial and Logistics agency for the North, said: “We have reached a critical tipping point where we need new developments on site to ensure that SME and mid-box occupier demand can be met. There are several large-scale distribution units on the market, but we have little to offer those occupiers seeking any units less than 100,000 sq ft. It’s a dangerous situation as businesses that want to expand or move into Yorkshire will have no choice but to look elsewhere for existing buildings.”
The Government has recognised that the development market is stalling and has introduced an incentive whereby all newly built commercial property completed between 1 October 2013 and 30 September 2016 will be exempt from empty rates for the first 18 months.
Whatmuff added: “Strong demand for speculative development coupled with the new Government initiative should go some way to kick-starting development. We would hope to see new facilities springing up in hotspots such as Leeds, Sheffield and Wakefield in the next 12 to 18 months.”
Ben Roberts of the Capital Markets team at LSH said: “There is strong investor demand in the regions with a focus on high quality industrial investment opportunities. The challenge facing investors is the continuing lack of stock being , which has led to a highly competitive market for the right assets.”
The LSH Industrial Market Review shows that the average industrial rent in Yorkshire for prime space currently stands at £5 per sq ft. Total take up for H1 2013 is approximately 3.9m sq ft.