Future requirements for industrial occupiers in the West Midlands are likely to be satisfied by design and build solutions as Grade A availability dwindles, according to a report commissioned by independent commercial property advisor GVA.
Published annually, GVA’s Industrial Intelligence report provides an overview of the industrial sheds market, with this year’s report forecasting an approaching shortage of good quality accommodation, as the Grade A supply chain dries up due to lack of speculative development.
David Willmer, Director, National Markets – Industrial, GVA, said: “Since the recession, existing speculatively developed space has accounted for a relatively high proportion of the total new space taken, reflecting the competitive deals available. However as a result, we are starting to see a lack of supply in some areas, most notably for sizes above 150,000 sq ft.
“Whilst retail failures and consolidations are likely to release more second-hand space onto the market in 2012, the supply of good quality accommodation is likely to decline, leading potential occupiers to look towards design and build solutions.
“We are seeing a particular scarcity of supply for larger sheds, with only three suitable buildings of 500,000 sq ft or above available in the region. A 334,000 sq ft unit that we are letting in Rugby, one of five that we are letting on behalf of Co-Op, has received some very strong interest.”
The report has also indicated that developers are preparing for a market upturn, despite generally muted activity in 2011, while activity in the distribution occupier market remains focussed on retail, especially the food retailers, internet operators, discount retailers and the automotive sector.
Nick Collins, Senior Director and national head of Industrial agency at GVA, said: “Across a number of regions developers are bringing forward new infrastructure and strategic planning strategies and are securing strategic sites. This positioning activity has been strongest in the South East, South West and Wales regions.”
This positioning for future development is occurring despite many areas of the UK having an increasing supply of secondary stock, although much of it is old and in some cases obsolete which is leading to trepidation from occupiers who are nervous about potential capital investment and dilapidations costs.
Revealing the geographic sector trends across the country, the report shows that the Midlands remains a centre for the automotive and aerospace industries, with the North East continuing to be dominated by manufacturing. The energy sector is growing in South West and Wales, while the North West is dominated by high take-up from high street retail distribution.
The growing importance of the CSR agenda for commercial companies is also believed to be responsible for the emerging trend of major retailers looking to locate their distribution points close to rail connections in order to reduce their CO2 impact.