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

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
·         In the East Midlands 2011 take-up reached 3.8m 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.
Helen Longstaffe, Director, Business Space at DTZ in Nottingham, 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.
She 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.”
Take-up in the East Midlands increased to 1.4m sq ft, almost double Q3 levels whilst annual take-up totalled just 3.8m sq ft. Deals were largely expansionary and retail driven, which was exemplified by the 300,000 sq ft letting at Swan Valley by Pets at Home, the largest deal of the quarter. During the quarter 800,000 sq ft of grade B space came onto the market although the availability of prime stock remains scarce.
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.”