Research released by property experts JLL predicts that improving economic conditions will translate into increasing industrial property demand this year, with take up set to exceed 2013 levels. JLL predicts a return to rental growth over the next four years and strong investor activity in the UK market.
At the end of 2013, availability across the UK of industrial units under 100,000 sq ft in size was 17 per cent lower than a year before. At the end of last year only 7 per cent of available space in units under 100,000 sq ft was in new or refurbished units, showing the lack of new-build activity during the recession and the recent acceleration in take-up of the best market options. In Exeter and Truro, supply levels are at a record low, now below 2% of the total stock. In Plymouth, the figure is slightly higher at 4%.
JLL expects to see an increase in speculative development nationally, with a number of ‘big box’ units and smaller multi-let schemes underway. There is currently some 2.1 million sq ft of floorspace speculatively under construction across the UK but limited, current activity in the South West.
Investment in the UK industrial property market totalled £4.4 billion in 2013, 70 per cent up on 2012 (£2.6 billion) with regional multi-let yields moving in by around 0.75% – 1% over the year. The report highlights that while investor demand will remain focused on prime stock, as availability continues to fall investors will look at good quality secondary assets and the difference between prime and secondary assets will narrow.
Tim Western, head of business space agency at JLL in Exeter, commented:
“The UK economy is gathering momentum which is translating into stronger, occupier demand. We expect supply levels, not just Grade A stock, to continue to reduce. With little stock coming to the market in most of the South West centres, we will see rental and capital growth as prospective occupiers battle to acquire existing floor space. It is a worry that without recycling of space, options for business growth may be restricted.”
