The latest research from Knight Frank shows that the South Wales industrial market continued to enjoy good levels of activity during the second half of 2015. Deals for industrial units over 50,000 sq ft in South Wales in the second half of 2015 (H2) reached approximately 1.1 million sq ft, which was 300,000 sq ft more than witnessed in the first half, and 200,000 sq ft more than the same period in 2014.
Neil Francis, Partner in the industrial agency team of Knight Frank in Cardiff, said: “Total take up for the year in Wales for occupied units over 50,000 sq ft was 1.9 million sq ft, which was less than we anticipated when reporting at the six-month stage.
“Of the recorded deals in the latter six months, two thirds were sales to owner occupiers, compared to the period from January to June when there was an equal split of freehold and leasehold transactions.”
Significant deals include Essentra signing a new lease on 278,000 sq ft at Imperial Park in Newport, and General Dynamics purchasing 236,000 sq ft in Merthyr.
“Both of these buildings had been on the market for over two years,” said Neil Francis.
“As with H1 there were also a number of deals that highlight the continued success and growth of local companies within the area. Examples included Zorba Foods purchasing 60,000 sq ft in Tredegar, Sarpak purchasing 55,000 sq ft in Baglan and Dr Organic acquiring 192,000 sq ft in Swansea.
“For units above 50,000 sq ft there remains approximately 4.85 million sq ft available throughout Wales, though the letting of Imperial Park to Essentra has reduced the Grade A stock even further.”
He added that the second half of 2015 had also witnessed the first significant pre-let new build for some time with the acquisition by DPD of a new 60,000 sq ft warehouse in Wentloog, Cardiff.
Looking ahead to 2016, Neil Francis said: “St. Modwen is due to complete its speculative development of 50,000 sq ft in Llanwern by February 2016, the first time in a number of years a new build industrial property of this size will have been brought to market.
“We expect good levels of demand and are optimistic of securing an occupier at record rental levels,”
He added: “Sadly with no other significant speculative development planned, refurbishment of older accommodation will be necessary to ensure modern stock is delivered to the market.
“Examples of this are Westcore, which is progressing with its £1.2 million investment at South Wales Distribution Centre, Kenfig, and Formaction which continues to purchase older sites throughout the region and refurbish and develop.”
Neil concluded: “With the lack of Grade A options, competition for better quality stock will intensify – especially along the M4 – which will only increase the rents received and harden incentives. This may finally provide the confidence needed for further development and 2016 promises to be another interesting year in the market for large industrial accommodation.”