DTZ, part of UGL Services, a division of UGL Limited (ASX: UGL), has revealed the findings of its Property Times UK Industrial Q4 2011 report which covers the market for properties over 50,000 sq ft.
- UK industrial take-up increased to 7.45m sq ft in Q4 2011
- Annual take-up for 2011 reached 28m sq ft, down 3.6m sq ft from 2010
- Investment activity increased to nearly £1.4bn in Q4 2011 and £3.4bn for the year
- Availability of grade A stock remains scarce in a number of UK regions
- 2011 take-up in the West Midlands reached highest level since 2008
According to the report, take-up of industrial stock reached 7.45m sq ft in Q4 2011, the highest quarterly total for over a year. Despite this, annual take-up for 2011 totalled 28m sq ft, down from the 31.6m sq ft recorded in 2010.
Investment activity in the industrial sector rose in the final quarter of 2011 to nearly £1.4bn which is the highest level since Q4 2006 and over 65% higher than the long-term average.
The availability of stock continued to fall for the fifth successive quarter with most UK regions reporting a severe shortage of prime space, although this has been limited by a large number of secondary units coming on to the market.
Simon Lloyd, Head of Industrial & Logistics at DTZ, commented: “In the last 12 months, we have seen the profile of occupiers shift, with manufacturing now accounting for 33% of all transactions which is up 13% from the previous year. This shift is further emphasised by a reduction in deal size as manufacturers typically occupy smaller units than retail and supply chain providers.
He continued: “Looking ahead, we anticipate that pre-lets, land sales and build-to-suit deals will be the overriding trend influencing 2012 take-up as speculative development remains unlikely given the current economic climate. The lack of available grade A space has impacted on the take-up figures, as there have been fewer opportunities available to occupiers.”
Letting activity in the West Midlands bounced back to 1.2m sq ft after a disappointing Q3, taking 2011 take-up to 4.7m sq ft, the highest level since 2008. This was boosted by several large automotive-related manufacturing deals including Plastic Omnium taking 120,000 sq ft in Coleshill after securing a contract with Jaguar Land Rover (JLR).
Simon Lloyd said: “The noticeable increase in take-up of large industrial and warehouse buildings in the Midlands has been fuelled mainly by the manufacturing sector, with buildings totalling over 300,000 sq ft being taken by Plastic Omnium, TTAS and Aston Martin, reinforcing the importance of the car industry to the Midlands. This trend will continue with the construction and opening of the new JLR engine plant at i54 which is expected to generate a significant amount of demand from tier 1 suppliers. However, the amount of available grade A space is now at such a low level, that construction of new buildings during 2012 seems inevitable.”
The report also revealed that rental levels remained flat in Q4, although agents expect incentives to harden on prime stock.
Martin Davis, Head of UK Research, said: “Providing there are no further shocks to the economic recovery, we anticipate that the developing shortage of industrial space will increase the likelihood of rental growth in the near future.”