The current supply of new industrial property stock in the West Midlands will run out next year, research from property consultants CBRE has revealed.
Latest figures for the region’s industrial property market show that at the current average annual take-up rate of 1.73m sq ft there is only enough stock to sustain the market for another one and a half years.
In the West Midlands, just 2.66m sq ft of new, modern industrial units above 100,000 sq ft are available for occupation. This is down from 3.14m sq ft at the end of 2010. In total, including secondhand modern and other secondhand units, there is 5.58m sq ft available.
At the end of 2011 take-up of new industrial units totalled 2.92m sq ft, almost identical to the 2010 total of 2.94m sq ft and slightly below the annual average of 3.13m sq ft.
Richard Meering, senior director in the industrial agency team at CBRE in Birmingham, said the shed market has held up well in what continues to be a challenging environment for the property sector but warned that a complete lack of available stock was now a very real prospect.
“The region’s industrial property market put in another positive performance in 2011, with leasing activity mirroring that of the previous year,” he said.
“Sectors such as manufacturing, automotive and online retailing were the most active during the year, with notable deals including Amazon’s 707,000 sq ft letting at Gazeley’s G.Park development in Rugeley and Jaguar Land Rover’s proposed new 1 million sq ft engine plant at i54 in Wolverhampton, and we expect further activity in these sectors during 2012 with a number of significant design and builds to be announced shortly.
“However, as available stock continues to decline, and with no new stock in the pipeline, we could see take-up levels fall this year, as was the case in the East Midlands last year, where take-up plummeted from 6.8m sq ft in 2010 to just over 2.1m sq ft in 2011. Interestingly, it is the first year industrial take-up in the East Midlands has been lower than the West Midlands.”
With availability of new industrial units in short supply, Mr Meering said there would be increasing opportunities for developers offering “oven ready” design and build schemes. He also said
developers are starting to consider speculative building again, particularly units in the 10,000 – 60,000 sq ft bracket, and there is a strong likelihood that the first speculative schemes since 2007 will be built this year.
In terms of the year ahead and what lies in store for the industrial and distribution property market, Mr Meering said the manufacturing, automotive and e-tailing sectors will continue to drive demand, while other growth areas, such as recycling and environmental, will also be active in the market.
“Looking ahead, there is hope that warehouse demand from manufacturers will increase, particularly in the Midlands, in response to the development of Jaguar Land Rover’s new engine plant in Wolverhampton and increased capacity at the carmaker’s other plants,” he said.
“We are also likely to see continued activity in the automotive sector. For example, Peugeot is about to sign a deal to take a 300,000 sq ft distribution unit on the A45 at Ryton in Coventry and Coventry-based automotive group CPP Global Holdings will be building a new production facility at Lyons Park, in Coventry, formerly the Jaguar Browns Lane site. Last year, BMW also announced that it would be upgrading its Hams Hall engine plant in Warwickshire.
“On the retail front, while substantial demand from retailers is likely to be suppressed by difficulties on the High Street, we still expect to see demand from the grocery, e-tailing and discount retailer sectors.
“Next is reviewing its operations in the Midlands, while Amazon, following its letting at G. Park last year, has further active requirements. Online grocery distributor Ocado is also about to complete its new 350,000 sq ft distribution facility on Phase 2 of IM Properties’ Birch Coppice development in Dordon, North Warwickshire.
“Last year IM Properties completed a £15m planning and infrastructure project at Phase 2 and with up to 1.1m sq ft of design and build opportunities still available at the site we’re expecting it to attract further occupier interest, particularly given the advantages it offers with a dedicated onsite rail terminal.”
