Rental prices of Midlands’ medium size industrial sheds (35,000 to 50,000 sq ft) will continue to rise to close to, or above, £7psf by Spring 2018, according to a leading industrial agent.
Kenny Allan, Director of Industrial Agency at Birmingham independent commercial property agency KWB, says that increasing demand for these units and a lack of supply will see prices continue to rise.
“Leasehold prices of these medium size industrial and manufacturing units have been climbing steadily from around £4.95psf to £6.25 – £6.50 psf over the past three years. However, except in one or two very well established, key locations, it is still largely uneconomic for developers to build new units of less than 100,000 sq ft,” explains Mr Allan.
“Gap funding from some local authorities to give the developer an acceptable margin can help to get some projects off the ground, but even where the local authority is keen to help, issues such as ground remediation costs can often have a negative impact.
“Capital values of medium size units have increased, but bank valuations of freeholds are lagging behind owners’ and the market’s expectations, which means purchasers generally cannot get affordable mortgages, and cash buyers of sheds or more than 35,000 sq ft are very rare.
“Capital values will continue to increase on the back of the shortage of units, but it remains difficult to sell these units in a deal which involves vacant possession, given the complexities of gaining a commercial mortgage.
“So for businesses looking for new premises to expand into, leasehold is really the only prospect, and the on-going shortage will continue to push prices towards £7psf and above. However, for businesses requiring new or additional space, finding a suitable vacant unit remains the main problem in the present market.”