After a subdued Q1, the industrial market achieved a take-up total of 9.4 million sq ft in Q2, which is the largest amount seen since Q2 2010 according to DTZ’s latest industrial report.
There is healthy occupier demand predicted for the second half of the year over most of the regions; however the lack of speculative development means occupiers are starting to consider build-to-suit options to acquire good quality stock.
Q2 has seen a slight reduction in grade A take-up but was still resilient at 32% of the total, despite the continuing lack of prime availability. It has been a strong quarter for build-to-suit deals, signifying their re-emergence into the market.
The industrial market is forecast to experience a steady rental growth average of 1.2% per annum over the next 5 years.
Commenting on the West Midlands, Simon Lloyd, Head of Industrial Agency and Development for the UK says:
“Q2 take-up totalled just short of 1.5 million sq ft, an impressive improvement on Q1, and 800,000 sq ft greater than Q2 2012 (Figure 14). However, a large portion of this relates to Foleshill Road/Old Church Road, Coventry; a grade B deal that was taken up by Trebor Developments. This was a vacant land deal, and part will be converted to residential.
“Total availability has been increasing slowly since Q2 2012; however since Q1 the availability has dropped by 500,000 to 20.9 million sq ft. Despite fluctuating availability, prime availability has been consistently and steadily decreasing. There is now just over 2 million sq ft of grade A space available in the whole of the West Midlands. Prime space is extremely constrained in the core of the region with better availability outside the centre.
“There were no design and build deals in Q2, although some are still predicted in the near future. This forecast, along with a modest growth in rents is set to continue over the next 12 to 18 months. The take-up outlook is also looking promising with 750,000 sq ft under offer and expecting to complete in Q3. However, availability is only likely to be bolstered by the recycling of stock through company relocation or failure, even though IM properties are building speculatively at Birch Coppice.”
You can download the report here: DTZ_Property_Times_UK_Industrial_Q2.