The West Midlands industrial market is poised for continued rental growth over the next five years, according to Savills latest Big Shed Briefing.
Savills rental growth forecasts predict a robust 4.8% annual growth over the next five years in the West Midlands for the industrial sector for units over 100,000 sq ft. The research also notes that, following an uptick in available supply at the beginning of 2023, supply levels have remained stable and there are currently 27 units over 100,000 sq ft available in the West Midlands, totalling 6.04 million sq ft. The region currently lacks any available units over 450,000 sq ft.
Ranjit Gill, Industrial and Logistics Director at Savills Birmingham, comments, “Throughout the course of 2023, we witnessed a resurgence in occupier interest, despite prolonged decision making timelines associated with larger strategic investments. Undoubtedly, the West Midlands has solidified its position as a hub for logistics and manufacturing space, characterised by resilient prime rents that have weathered challenging market conditions. We expect this positive trend to continue for the foreseeable future.”
Of the available stock, 25% is Grade A speculatively developed space, 45% is Grade A second-hand space, 20% is Grade B space and 10% Grade C space. Despite an increase in supply, the vacancy rate remains in line with the long-term average of 5.98%, equating to 0.94 years’ worth of supply based on the five-year annual average take-up.
In 2023, take-up reached 3.68 million sq ft across 19 transactions, a 23% decline from the long-term average. Savills notes that one of the reasons for the decline is the lack of large units which were available during the period. Economic pressures have also led occupiers to shift away from the build-to-suit route, with only 26% of transacted space being built-to-suit compared with 47% in 2022, 15% speculatively developed, and 59% second-hand.
The report notes that the diversity of occupiers taking space in the West Midlands remains mixed, with manufacturers accounting for 33% of all transactions, followed by third party logistics providers (3PLs) at 25% and grocery retailers at 18%.
Looking ahead, the West Midlands has a promising development pipeline, with 14 units under construction, totalling 2.89 million sq ft, spread across various size bands.
Christian Smith, Industrial and Logistics Director at Savills Birmingham, added, “Our latest Big Shed Briefing indicates a thriving industrial landscape in the West Midlands, with the anticipated rental growth set to drive economic expansion over the coming years.”