Speculative development of industrial space above 50,000 sq ft expanded outside of the M1/M6/M25 corridors in Q1 for the first time since development recommenced in late 2013, according to DTZ.
Two units totalling 138,000 sq ft in Chandlers Ford, Hampshire, along with a plethora of buildings in the South East, Midlands and Yorkshire gave a much-needed injection of new grade A supply to the market. Grade A availability increased to 12.2m sq ft in Q1, confirming the end of a downward trend since 2009, where lack of development meant that this best quality available space fell by 77% over five years.
Occupiers continue to utilise the build-to-suit market, with this type of deal accounting for 4.5m sq ft, or 84% of grade A take-up in Q1 2015. Q1 build-to-suit take-up was already significantly higher than that of the entire second half of 2014. These kinds of deals are predominantly located in regions where there is low grade A availability and where speculative development has not yet begun in a meaningful way. Next plc took 703,000 sq ft of build-to-suit space in Doncaster in the largest deal of the quarter.
Ben Clarke, Head of UK Research at DTZ added: “This increase in developer activity has been very welcome at the supply-starved prime end of the industrial market. With occupiers actively seeking out the highest quality buildings, we expect industrial prime rents to rise by 2.2% on average per year over the next five years.”
Simon Lloyd, Head of Industrial Agency at DTZ, based in Birmingham said: “The shortage of grade A space has meant that occupiers have had to take a built-to-suit option with its longer lead-in time, or an older grade B building in order to satisfy their property requirement. The increased grade A supply generated by an accelerating speculative programme will mean that they are now more able to take a better building with its operational benefits.”
Robert Ladd, Head of Industrial Agency at DTZ Cardiff, said: “The shortage of grade A space has meant that in recent years occupiers have either had to take a built-to-suit option with its longer lead-in time as evidenced by Travis Perkins and Geopost in Cardiff, or an older grade B building in order to satisfy their property requirement. Wales is still unlikely to see a significant number of speculatively built properties over 50,000 sq ft in the near future although St Modwen has submitted planning for a speculative 50,000 sq ft building at Celtic Business Park. However there are several regional developers such as Formaction that have re-entered the smaller sized property market and who are again building speculatively. An increase in grade A supply that will be generated by an accelerating speculative programme will mean that occupiers will once again have the option to take a better building with its operational and sustainability benefits.”