A shortage of available stock is continuing to blight the Midlands’ industrial property market as new figures from CBRE show take-up was constrained during the first half of the year.
According to the firm’s latest UK Logistics MarketView, take up of new and secondhand units over 100,000 sq ft between January and June 2013 totalled 1.95 million sq ft, down slightly on the same period last year when take-up reached 2.16 million sq ft.
More than half (1.198 million sq ft) of the deals transacted in the first six months of the year were on secondhand units. Among the key deals to complete was the 374,000 sq ft letting to Hermes Parcels at Tamworth 594, the former Focus DIY warehouse, and 422,000 sq ft to WRS Ltd at The Campbell Centre, in Stoke-on-Trent.
Take-up of new industrial space totalled just 758,601 sq ft, further highlighting the shortage of large ready-to-occupy units in the Midlands.
Richard Meering, senior director and head of CBRE’s industrial and logistics team in the Midlands, said: “The start of 2013 was relatively quiet across the Midlands market as the squeeze on supply suppressed the pace at which deals could be completed. Nevertheless, during this time enquiry levels held up and since April transactions have been taking place.
“The majority of good, modern, existing units are also attracting strong interest from occupiers, in many cases from multiple parties, which bodes well for take-up during the second half of the year. However, the lack of good quality, ready-to-occupy warehouse space in core Midlands locations will pose significant challenges for occupiers looking for units on a short-term basis where design and build solutions are not available.”
Availability of new industrial units at the end of the first half of the year stood at just
1.8 million sq ft, compared to 4.9 million sq ft of secondhand space.
Across the Midlands there is just one unit above 500,000 sq ft – Logistics Property Partnership’s 528,000 sq ft unit in Corby. The second largest available unit, Gazeley’s 383,000 sq ft G.Park Blue Planet in Stoke-on-Trent, was recently let to JCB, further exacerbating the supply crisis.
Mr Meering said the lack of available stock means the focus will continue to be on the design and build market.
“While supply remains restricted and delivery of new space remains limited, the industrial market will be weighted towards design and build,” he said.
“However, there are a limited number of sites in the Midlands that can truly be described as deliverable, that is cleared with planning permission and infrastructure already prepared.
“As a result of these market dynamics, developers are being put under increasing pressure to begin speculative building again. IM Properties has committed to building two units of
165,600 sq ft and 168,900 sq ft at Birch Coppice, of which one building has already been let to an undisclosed occupier and there is strong interest in the second.
“What we need now is for more developers to follow IM Properties’ lead so that the Midlands has the supply available to meet the demand.”
Ed Gamble, head of the capital markets team at CBRE in Birmingham, said the improving occupational market, coupled with increased demand and a shortage of quality space is forcing up values and driving yield improvements in the Midlands shed market.
According to CBRE’s ‘EMEA Rents and Yields Monitor Q2 2013’, in the last six months yields on prime industrial stock in the Midlands have moved 50 basis point to 6.25 per cent.
“The combination of a lack of available stock, an increase in demand and an improving occupational market means confidence has returned to investors, which in turn means we are starting to see real capital growth in the industrial market again.
“With the supply and demand equation unlikely to change in the near future, we can expect further yield compression.”