Lack of Grade A space will lead to rent increases

A lack of Grade A space in the industrial and distribution market in the East Midlands is likely to result in a rise in rents for prime space, according to the latest research from commercial property firm Lambert Smith Hampton (LSH).

Rents are already on the rise in many parts of the UK and the East Midlands is poised to follow suit according to LSH’s annual analysis of the market – National Industrial and Distribution Market 2012.

Grade A space in the region has continued to fall, particularly in Nottingham, Derby and Leicester. Although rents declined slightly over the year this trend is unlikely to continue as available Grade A space is snapped up. Prime rents in major conurbations have already stabilised.

Geoff Gibson, Head of the Leicester office of LSH said, “Our findings show that prime rental values are on the increase in strategic locations where there is little or no Grade A space available. This trend will be reflected in the East Midlands, and the market imbalance will cause the market to tip in favour of landlords who own quality space, allowing them to harden their stance on rent and incentives. Countering this, our research shows that rents for secondary space continue to fall.”

Despite the strong take up in the East Midlands over the past three years and the shortage of Grade A space, overall  availability rose slightly during 2011 as the release of second hand space gathered momentum.

Take-up activity in the East Midlands exceeded 10 million sq ft for the third year in succession and is running at 23 per cent above the five year average. Grade A space accounted for more than a third of the activity during the year.

Major deals in the region included Crown Crest’s letting of 200,000 sq ft on the Derby Distribution Centre, POS Direct’s take up of 70,000 sq ft in Leicester, Eddie Stobart’s purchase of 275,000 sq ft at Magna Park, Leicester and Gardner Aerospace’s letting of 120,000 sq ft of new stock at Sinfin in Derby.