Knight Frank’s recently published Logistics & Industrial Commentary Report has revealed that industrial property take-up within the UK recovered strongly in the second half of 2012, following subdued activity for many UK regions last summer.
Take-up for units over 50,000 sq ft was 20.5 million sq ft during this period which represented a 22% increase above the first half of the year and is the highest since late 2010.
In terms of the Welsh industrial occupier market, activity during the second half of 2012 was up 51% compared with the first half of the year, a take-up increase far exceeding the national average. In Wales, take-up of units exceeding 50,000 sq ft totalled 1.6million sq ft for the final six months of 2012. The majority of this space was second hand accommodation, as opposed to Grade A, which further reiterates the lack of prime space within the region.
Neil Francis, Associate in the Industrial Team of Knight Frank’s Cardiff office, said: “The financial climate continues to hinder speculative development within the region. In the past this has not been such an issue as speculators were prepared to purchase larger empty buildings, refurbish and sub-divide to provide a new product within the market.
“However, with the banks’ on-going reluctance to lend on large industrial facilities, prospective purchasers of such units have to fund via cash and this has limited demand and consequently impacted on the prices paid.
“This is particularly worrying when you consider that the announcement of recent closures throughout South Wales will release another 1.5 million sq ft of larger units into the industrial market. South Wales does not benefit from the larger logistics/warehouse requirements that have seen a return to pre-let agreements for the “Big Shed” market within England. It is therefore difficult to see where occupiers for these large spaces will come from so sub division appears the most feasible option.
“But how do we make these refurbishment opportunities attractive? Surely now is the time for the Welsh Government to consider offering incentives to those speculators/developers active within the area. Abolishment of empty rates liability on units over a certain size would certainly assist. Tax initiatives or capital contributions on refurbishment works could also appeal and attract more of these operators into the market and increase the likelihood of newer stock being offered.
“With the residential developers once having an appetite for larger sites within the region a relaxation of planning restrictions for older sites – especially those close to existing residential estates and past their economic life – may breathe life into parts of the valleys currently struggling with closures and job losses.
“It will be interesting to see how the remainder of the year evolves. Early indications are that while overall demand for units above 100,000 sq ft has been limited, there remain a number of good quality requirements in the 25,000–50,000 sq ft bracket which could help to boost take up figures come the end of 2013.”