Recent deals activity on prime speculative warehousing space across the Midlands has resulted in an uplift in market confidence, as quoting rents for new speculative industrial space have surpassed pre-recession heights, according to Colliers International’s latest research.
Rents in the Midlands were one of the first regions to see a significant jump, with deals on speculative space at the start of the year breaching the £6 mark. Syncreon’s agreement to lease the 127,500 sq ft speculative Prologis Park Midpoint for £6.35 per sq ft in March this year set a new headline rent for the Midlands.
Spurred on by this market activity, a number of developers are about to announce further speculative builds and, according to Colliers International, are rumoured to be quoting between £6.35 and £6.50 per sq ft – a significant increase when compared to the £5.75 per sq ft quoted in the 2008 pre-recession market.
Simon Norton, Director, Industrial & Logistics, Colliers International in Birmingham, explained: “It has been wildly publicised over recent months that the supply of existing buildings and indeed “oven-ready” distribution sites in the midlands is in short supply. In fact, recent statistics indicate there are only approximately three to six months’ supply of existing good quality distribution warehousing of over 100,000 sq ft left in the Midlands, and no units at all readily available of over 250,000 sq ft.
“This shortage of stock has had an upwards impact on rental levels in the region, with prime quoting rents for big sheds now reaching £6.50 per sq.ft in the Midlands M1, M42 and south M6 corridors. Speculative development is still confined, for the majority, to the M1 and M42 corridors in the Midlands and Manchester in the North West, with the M1 motorway between London and the Midlands still seeing the most demand. Currently there are approximately 15 speculative buildings planned for construction over the next 12 to 18 months in this area.
“Demand for the most part is still being driven in the Midlands by the automotive sector, elsewhere there is very positive retail sector growth, with the occupiers themselves such as B&M, Dunelm and Zara and their Third Party Logistics operators all having active requirement either on-going or very recently satisfied. Where we have seen a down turn in demand is in the supermarket sector with the exception of the budget occupiers, Lidl & Aldi. The ‘big three’ have all reined in their active requirements, whilst they monitor the market.”
Colliers’ research went on to show that on average, rents across the UK as a whole have jumped considerably between June 2014 and July 2015 – by 18% for big sheds and 15% for smaller sheds.
Len Rosso, Head of Industrial and Logistics at Colliers International added: “Shortage of new supply, coupled with expansionary activity from occupiers keen to take advantage of the more benign economic environment, meant that secondary rents have seen sharp upward movement in the last 12 months. Prime asset rents are significantly up year and on year but for those occupiers trying to avoid paying the higher prices, the secondary market is the next option. This has increased demand for secondary stock so consequently, rental prices are also rapidly rising.”