Industrial property in the South West will be transformed in 2017 from ‘Cinderella sector’ into the strongest performing real estate asset class in the South West over the next four years, according to a commercial property expert.
Commercial property specialist Colliers International, is predicting average total returns of over seven per cent, and Tim Davies, head of the Industrial and Logistics team in the Bristol office believes industrial stock in the South West represents the most attractive property investment.
“After decades in which industrial was regarded as the Cinderella sector of real estate, it is now undergoing a transformation and in 2017 will see increasing interest from investors who are attracted by the potential for rental growth driven by a seemingly insatiable thirst from occupiers.
“An added dimension in the South West is the acute shortage of quality stock in many parts of the region. Take-up figures for the first six months of 2016 provided by the Industrial Agents Society show that 3.2million sq ft and almost 50 acres were taken up, showing how robust the Greater Bristol market has been.
“Supply of stock now stands at 3.4% compared to the 10-year average of 12%, and enquiry levels since the beginning of September 2016 suggest this trend is likely to continue as units that become available are soon snapped up.”
According to recent research from Colliers International, the average annual industrial rental growth in 2016-2020 of 2.2% will be the fastest pace of growth among the main commercial sectors by a comfortable distance. Similarly, average total returns of 7.0% over the same five-year period will place it well ahead of the pack, consisting of 5.5% income return and 1.5% capital growth.
Mr Davies said that demand for industrial stock in the South West would be further fuelled by a number of factors affecting the South West namely the construction of the new Hinkley Point C power station; the devolution deal that will create the West of England Combined Authority; and the opening of a new junction on the M49, which will improve access to swathes of vacant land at Severnside Enterprise Area.
“Despite concerns about the economy predominantly due to the uncertainty surrounding Brexit, rental levels over the last 12 months have been remarkably resilient throughout the South West, and moreover, most areas are showing evidence of rental growth and reduced landlord incentives,” he said.
“This in part reflects occupier demand remaining consistent but also a continuing lack of new development and therefore supply levels are at an all-time low. The resulting imbalance between supply and demand can only drive prices upwards.
