Industrial take-up increases in Q4 2011 as the availability of prime stock dwindles

DTZ, part of UGL Services, 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
·         In Wales take-up in 2011 reached 1.9m 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.
Neil Francis, Associate Director, Industrial agency 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.”
In Wales, there was only one reported letting of 70,000 sq ft in Q4, although a large number of deals below 50,000 sq ft were transacted. Demand for space in Q1 2012 looks promising, including Speedyhire, which has a 100,000 sq ft requirement for grade A space along the M4. However, prime space is scarce with little development scheduled.
Neil Francis said: “The M4 motorway remains the focus for much of the recent market activity. Within the investment market Hansteen has continued their acquisition programme, and as part of a UK wide portfolio purchase have acquired a number of estates throughout South Wales. This is an expansion of their existing ownership in Wales and includes estates in East Cardiff, Swansea and Mid Wales.
“In terms of occupational activity, DHL recently committed to a letting of 45,000 sq ft at Tregwilym Road, Rogerstone which is in close proximity to Junction 28. There has also been lettings at Portmanmoor Road in Ocean Park, Cardiff where two 10,000 sq ft detached units have been let to established national occupiers. Both have signed 20 year leases, which highlights continued confidence in the area as a commercial location.
“There has also been an increase in requirements from South Wales based occupiers looking to expand.  This has certainly been evident between Junctions 35 and 42, with a number of requirements for 50,000 sq ft to 100,000 sq ft. The use type includes warehousing, distribution, packaging and training, which is a good mix and a marked improvement on past activity.”
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.”