DTZ, part of UGL Services, a division of UGL Limited (ASX: UGL), has revealed the findings of its Property Times UK Industrial Q4 2011 report which covers the market for properties over 50,000 sq ft. According to the report, take-up of industrial stock reached 7.45m sq ft in Q4 2011, the highest quarterly total for over a year. Despite this, annual take-up for 2011 totalled 28m sq ft, down from the 31.6m sq ft recorded in 2010.
- UK industrial take-up increased to 7.45m sq ft in Q4 2011
- Annual take-up for 2011 reached 28m sq ft, down 3.6m sq ft from 2010
- Investment activity increased to nearly £1.4bn in Q4 2011 and £3.4bn for the year
- Availability of grade A stock remains scarce in a number of UK regions
- Q4 take-up in the South West fell to 410,000 sq ft
Investment activity in the industrial sector rose in the final quarter of 2011 to nearly £1.4bn which is the highest level since Q4 2006 and over 65% higher than the long-term average.
The availability of stock continued to fall for the fifth successive quarter with most UK regions reporting a severe shortage of prime space, although this has been limited by a large number of secondary units coming on to the market.
Simon Lloyd, Head of Industrial & Logistics at DTZ, commented: “In the last 12 months, we have seen the profile of occupiers shift, with manufacturing now accounting for 33% of all transactions which is up 13% from the previous year. This shift is further emphasised by a reduction in deal size as manufacturers typically occupy smaller units than retail and supply chain providers.
He continued: “Looking ahead, we anticipate that pre-lets, land sales and build-to-suit deals will be the overriding trend influencing 2012 take-up as speculative development remains unlikely given the current economic climate. The lack of available grade A space has impacted on the take-up figures, as there have been fewer opportunities available to occupiers.”
Q4 take-up fell to 410,000 sq ft in the South West and was dominated by grade B deals. Retailer Morrison’s returned over 600,000 sq ft of grade A and B space to the market in Swindon and Bristol after consolidating into a new facility in Bridgewater. The outlook for 2012 is promising with a number of active requirements for space over 400,000 sq ft.
Simon Lloyd said: “The take-up of large buildings in the last quarter has reduced significantly which was, in part, due to the very limited availability of good quality buildings in the market. Nevertheless, there remains a good level of pent up demand, and the first and second quarters of 2012 are likely to witness increased activity as occupiers firm up their requirements and commit to new buildings.”
The report also revealed that rental levels remained flat in Q4, although agents expect incentives to harden on prime stock.
Martin Davis, Head of UK Research, said: “Providing there are no further shocks to the economic recovery, we anticipate that the developing shortage of industrial space will increase the likelihood of rental growth in the near future.”