Incentives are going down and prime rents are going up says JLL as it launches its UK Industrial Property Trends report, with a spotlight on units between 1000 and 99,999 sq ft typically found on multi-occupied industrial estates.
Over the 12 months to December 2014 most major industrial markets in the West Midlands registered growth in prime rents. In Birmingham rents increased from 5.75 to 6.00 per sq ft in 2013 to 6.00 to 6.25 per sq ft in 2014. The Black Country and Coventry also saw a rise, with Solihull remaining static having already achieved 6.50-6.75 and this trends appears to be continuing into 2015.
Cameron Mitchell director of industrial & logistics at JLL’s Church Street offices said: “The trend is driven by a shortage of supply, a stronger market and increased build costs. Within the West Midlands industrial market occupiers remain focussed on securing good quality existing units that are either already available or currently under construction as often they have left insufficient time to go down the Design & Build route and there just isn’t enough quality space to go round.
“Whilst we expect to see further speculative development announcements this year, we suspect on a number of these won’t begin construction until the end of the year or into next year. This will put increasing pressure on occupiers looking to take space and may compromise operational efficiency.”
A sizeable proportion of the available floorspace nationally consists of poorer quality buildings. Nationally, at the end of December 2014, only 7% of total availability in units from 1,000 to 99,999 sq ft compromised new or refurbished stock. At February 2015 there were six schemes speculatively under construction in the West Midlands totalling almost 1 million sq ft. Only one was under 100,000 sq ft.
“The imbalance of quality supply and demand, will clearly continue to put upward pressure on rents and tenant incentives will harden.”
With the economy anticipated to continue to grow this year and strong market sentiment, we expect another strong year in terms of occupier demand, however, diminishing supply may constrain the level of transactions in some markets.
At the end of December 2014, availability involving units from 1,000 to 99,999 sq ft was 16% lower than at December 2013, with availability of units of 100,000sq ft and over 15% lower.