Like much of the Midlands, Wellingborough’s industrial and warehousing occupiers are ready and eager to expand says commercial property agent Prop-Search, however the trouble is there is little or no choice in terms of existing building supply. Even employment land supply is unavailable – until the land supply to the East & North is unlocked – which unfortunately is years away, rather than months.
So just as the economy picks up and businesses hauls themselves out of the grips of recession, the tools to capitalise on the new opportunities available and renewed confidence – in the form of suitable property in which to expand – are not available.
The toolbox is empty!
Take up of industrial/warehousing space continued all the way through the recession, albeit a lot of it on short term/low rent leases/licences. However, more recently, rents have hardened, rent frees and incentives reduced, and occupiers have ‘stayed put’ – extending short term occupations – hoping that a suitable long term home becomes available.
Simon Toseland, a Director of Prop-Search, said: “The problem is that companies looking to relocate and/or expand are often faced with compromise rather than the right solution. Taking property that is lower quality than they ideally want or need, property in the ‘wrong’ location or multiple properties – where one unit would be preferable. And compromising often means that the decision process becomes drawn out, leading to multiple occupiers all looking at the same properties and competing for them – hence the increase in rents and reduction in incentives.”
“And there is no quick solution in sight.”
The realistic solution – like the solution to the so called ‘housing crisis’ – is to build new stock. But the irony is that over the last few years, build costs have continued to rise and the effect of this is that occupational costs have to increase to compensate.
When new build opportunities do come along – and like many agents, we are working on new developments that will be available next year – the differential between the level of rent being paid by occupiers today, and historically over the last 6 years, compared with the rent now required to make development viable, is significant. More often than not, raising both eyebrows, accompanied by a sharp intake of breath!
Average rents for ‘standard’ industrial units in and around Wellingborough vary from circa £4.00 per sq ft to £5.50/£6.00 per sq ft, dependant on size, location and specification. The estimated rental value of equivalent new build property is £6.50 to £7.50 per sq ft. In Northampton, there is already talk of rents hitting £8.00 per sq ft or more for similar property.
This growth in rental value is welcome news for landlords, as for many years, rents have remained comparatively low, with little growth. The increase now being experienced will re-balance the market, but this will take occupiers time to digest’.
Of course, growth in new build values will drag second-hand market values with it – so companies relocating should be able to recoup money/value from the property they vacate. The late 1980’s saw premiums being sought and exchanged for second-hand commercial property and it is entirely feasible that this trend could return.
So for the immediate future, companies needing to relocate will have to take what’s on offer says Prop-Search and on increasingly less generous terms than have been available in the past few years. As the UK heads towards deflation for the first time since the 1960’s, it seems that investment in commercial property is once again a good bet.
