The West Midlands economy looks set for a year of strong growth driven by buoyant automotive, retail and logistics sectors, according to a new report from a leading commercial property consultancy.
The West Midlands Industrial and Logistics Market Review, published by Lambert Smith Hampton (LSH), found that more than 1.7m sq ft of industrial space has already been let across the region in the first half of 2015.
These included seven deals of more than 100,000 sq ft, with the biggest deal seeing Dunelm taking 525,000 sq ft at Prologis Park in Stoke-on-Trent.
Matt Tilt, associate director of industrial and logistics agency at LSH in Birmingham, said: “The commercial property sector tends to be a pretty telling bellwether of the overall economic environment, and the signs are good.
“The majority of the deals have fallen within the fabled ‘golden triangle’ of the M6, M1 and M42 but the continuing demand for space in the region and a lack of available land means developers are moving slightly off the beaten track to satisfy demand from potential occupiers.
“In the mid-box sector we are currently seeing some welcome speculative builds with developers like St Modwen and IM very active in the region with schemes planned at diverse locations ranging from The Hub in Birmingham and Burton Gateway in Staffordshire.
“In the big box sector, major pre-lets are driving a boom of development with Prologis set to start work on DC7 Ryton imminently having secured deals of more than 450,000 sq t with UK Mail plc and Jaguar Land Rover. The challenge remains however that much of the big box development in the region is pre-let so there will remain supply issues in that part of the market for some time to come.”
The report also suggests that the on-going lack of supply is leading to limited opportunities for occupiers, with multi-let industrial estates currently experiencing historically low vacancy rates.
Matt added: “It is undoubtedly a seller’s market. The shortage of Grade A space means we are seeing landlords holding out for much longer lease terms with up to 15 years with no break options now becoming the norm for prime buildings.
“We are also seeing a tightening of tenant incentives generally across all size ranges and rents of £6.50 per sq ft are now being achieved and they could well go beyond that in the short to medium term that will also help drive what is an already buoyant investment market.”
“In short though, it’s a very positive story. The wider West Midlands still remains one of the strongest industrial markets in the UK which is being driven by the logistics sector and in particular the strong automotive and the evolving retail sectors. We are also expecting further announcements on speculative schemes in the near future, which will help rebalance the current supply and demand mismatch, and if we can solve this issue then the region looks in very good shape going forward.”
Other deals of note included Jaguar Land Rover snapping up 312,000 sq ft at DC4 Prologis Park Midpoint in Minworth and Screwfix taking 230,000 sq ft at DC4 Prologis Park Midpoint in Staffordshire.