By Danny Cramman, Director at Avison Young and joint agent on Integra 61, with Colliers International:
As we approach the end of Q3 there have been some significant signs that occupier confidence is returning to the North East industrial market.
Looking at larger transactions in excess of 50,000 sq ft, there were only two occupier led transactions in Q1 totalling 177,000 sq ft. Moving forward into Q2, we saw a marked improvement with five transactions in this size range leading to a total take up in excess of 500,000 sq ft, more than double the previous quarter.
The figures for Q3 are yet to be collated but the above shows that after a slow start to the year things are improving in the industrial market. Take up is being driven by a number of sectors, with storage and distribution being the main contributor so far. The manufacturing sector remains important in driving demand in the region also.
Looking at transactions in the sub 50,000 sq ft size range, according to CoStar there were 44 deals in Q1 of this year. This figure rose to 47 transactions in Q2 with the amount of space taken also increasing against the Q1 figures. Figures are yet to be released for Q3, but this again shows an upward trend.
Another positive for industrial and logistics property investors and developers is that the rental levels achievable across the North East for good quality product have held up well. Although growth may have slowed slightly from the peak of the market, rents are continuing on an upward trajectory, and we expect this to continue going forward.
Whilst there has been some speculative development over recent years there remains a supply and demand imbalance. How tight supply is will be dependent on the size band and location of a particular occupier requirement, but it is safe to say there are shortages in most sizes and locations across the North East region, particularly for new build and good quality product.
With this shortage of Grade A stock, the 640,000 sq ft Connect development at Citrus Group’s £400m Integra 61 mixed-use scheme is an excellent example of a strategic site with a range of unit sizes to meet a variety of occupier needs. The scheme, the largest the region has seen in over a decade and conveniently located at J61 of the A1(M), offers a wide range of space options for occupiers from design and build to ready to occupy units.
With interest rates set to fall further during the remainder of the year we hope to see continuing growth in occupier confidence feeding through into increased levels of take up across the whole of the North East.
