The take up of industrial units in excess of 50,000 sq ft in the South West region in the first six months of the year was double that of the previous six months, according to new research from Knight Frank.
The take up of 1.69m sq ft across five transactions was also 31 per cent above the level of take-up over the same period last year.
Russell Crofts, who heads Knight Frank’s industrial agency team in Bristol, said: “There has been a series of significant land sales, with DHL acquiring 15 acres at Central Park for a 160,000 sq ft Regional Distribution Centre (RDC), which they are in the process of selling by way of sale and leaseback.
“Amazon has also continued its expansion and has recently acquired 33.5 acres for the construction of a new 1.25m sq ft fulfilment centre at Central Park, replicating its first unit in Tilbury.”
Chancerygate’s 156,000 sq ft acquisition of the former Alcan site at Warmley and McGill Transport’s 80,000 sq ft deal at Keynsham Mill, Keynsham were also significant.
Russell Crofts added: “There are signs of speculative development in the big shed market, with DB Symmetry at Swindon being the first to break cover with a 211,000 sq ft unit.”
The first six months of 2017 also saw continued performance in the small to medium size ranges, with rental growth across all qualities of stock.
“For the first time in this cycle, developers are confident to start developing on a speculative basis,” said Russell Crofts. “Bristol, the most robust market of the region, now has over 650,000 sq ft of units under 50,000 sq ft under construction, with completion due throughout H2 2017 and H1 2018. This market movement has allowed rental growth at the prime end of the market for the first time in six to eight years.”
The research shows that lease expiries due between 2018-2019 throughout the South West of bigger first generation stock had meant that the focus remained on the 100,000-200,000 sq ft size band, with at least four buildings due to be vacant in Bristol.
Rental growth in secondary sites was starting to slow in small size ranges suggesting there may now be an affordability issue. While well-refurbished space let well, budget refurbishments rented less well.
“The mid-range market slowed considerably in H1, with fewer deals completed in the 30,000-70,000 sq ft size range, said Russell Crofts. “Demand is slowing, but the supply side of the equation is also limited. A small number of transactions could see this balance restored in the second half of 2017.”
Looking ahead he believed that the second half of 2017 would see continued demand from storage and distribution operators throughout the region, as structural change in the retail industry continued.
“We anticipate a slowdown in development activity as the new wave of buildings are completed and taken up, “ said Russell Crofts. “Prime rents are expected to rise as developers let more product and take confidence from market demand levels.”
Bristol prime headline rents of £9.50 per sq ft for property under 20,000 sq ft were expected to increase in the second half of the year, while 20,000-50,000 sq ft property would remain at £8 per sq ft, and units over 50,000 sq ft would remain at £7.00 per sq ft.
Headline rents equivalents for Swindon were £8 per sq ft under 20,000 sq ft, £6.50 between 20,000 sq ft and 50,000 sq ft, and £6.25 over 50,000 sq ft.
For Exeter, headline rents equivalents were £7 per sq ft under 20,000 sq ft, £6.50 between 20,000 sq ft and 50,000 sq ft, and £6.00 over 50,000 sq ft.
