Take-up of industrial units over 50,000 sq ft in the South West reached an exceptional 2.4m sq ft during the first six months of the year– the highest on record since 2007 – according to research from property adviser Knight Frank.
The total was more than double the level of take-up over the same period last year, revealed Russell Crofts, partner in the industrial agency team of Knight Frank in London. “For all size ranges across the South West region an even higher take-up of 3.6m sq ft was achieved,” he added.
The high level of take-up was principally due to two significant deals at Central Park, Severnside. The Range bought 55 acres to build a 1.2m sq ft Regional Distribution Centre, due for completion in Quarter 4 2017, and Lidl bought 33 acres to build a 600,000 sq ft development.
In addition, on the same scheme Davies Turner bought 12 acres to build a 130,000 sq ft building and Mountpark acquired 20 acres to build a speculative scheme of 400,000 sq ft.
Russell Crofts said: “The large-format B8 storage and distribution sector has driven demand from both retailers and third-party distributors. The ability to acquire land has been a key element to the market, and sale and leasebacks will follow.”
Industrial supply in the first half of 2016 was down 30 per cent on the previous six months, and this limited availability combined with strong occupier demand had given developers the confidence to start speculative schemes.
“There are two major speculative schemes in the region; Mountpark, Central Park with three units covering 400,000 sq ft and Horizon 38 Filton with 250,000 sq ft across four buildings, with practical completion due in Q1 2017 and Q3 2017, respectively,” said Russell Crofts.
“The new speculative schemes will establish new rental benchmarks for speculative units in North Bristol (Horizon38) with quoting rents from £7.00 per sq ft upwards; and Mountpark in Severnside with rents at £6.00 per sq ft plus for 200,000 sq ft.
“There is also scope for a smaller unit scheme within the city.”
Post Brexit had seen the re-emergence of mid-size range requirements and there was strong rental growth in this sector due to the lack of supply. Persistent rental growth evidence throughout 2016 would underline the potential for speculative development.
Russell Crofts said: “There remains strong interest in all regional markets from Amazon who continue to demand both second-hand and new space. There are also a number of regional manufacturing and distribution requirements totalling over 1.5m sq ft to be satisfied.”
He said that the next 12 months would see the delivery of the first large-scale speculative unit since 2008, which would establish new rent levels.
“The next six months will also see the start of a new speculative scheme addressing the mid -range market, while the proposed new motorway junction on the M49, due to start in 2017, will greatly improve access to the most strategically important area of Bristol for storage and distribution,” he said.