Milton Keynes enjoyed the largest annual volume of industrial and logistics take up in 2017 for three years, a report by national commercial property consultancy Lambert Smith Hampton (LSH) has revealed.
However, the 2018 Industrial and Logistics Market Report says that just two transactions – H&M’s 775,000 sq ft build-to-suit unit at Gazeley’s Magna Park and XPO’s lease of 278,000 sq ft Prologis’ DC4 Marston Gate – accounted for nearly 50% of that take up.
It also reveals that a lack of stock in Milton Keynes and the M1 corridor is continuing to push up rents in the sector.
“The market is driven by a lack of supply, increased demand from online retailers and pressure on land supply for alternative uses, particularly residential “ said John McDougal, head of office at LSH Milton Keynes.
In nearby Northampton, build-to-suit deals at Brackmills Central to Black & Decker and Decathlon dominated new-build activity last year, while in Bedford, two major developments – Graftongate and London Metric’s Bedford Link and Goodman’s Bedford Commercial Park – are both due to commence development this year, which could help to ease pressure on both the local and the wider regional distribution market.
The strength of the Bedford market in 2017 was indicated by the letting on completion of Chancerygate’s new speculative development, Cardington Point, at £7.50 per sq ft to IT Efficient.
In the secondary sector, Northampton recorded the best rental performance in the M1 corridor, with an increase of 14%. This was as a result of the release of quality second-hand logistics space into the market during 2017, most of which was taken up.
Speculative development away from the M1 returned in 2017, says the report, with Buccleuch’s 31,500 sq ft scheme in Wolverton and the second phase of the Chancerygate Business Park in Milton Keynes, while current speculative development in Northampton is limited to Cabot at Brackmills Central (172,000 sq ft) and two mid box units at Pineham (40,000 sq ft and 60,000 sq ft).
This year will see further speculative development at Aviva’s Swan Valley where two units totalling of 155,000 sq ft are planned, and 211,000 sq ft at Prologis Park Pineham.
The national picture saw record annual volume of £7.5bn, a renewed bout of yield compression and sector-leading annual returns of 19.6%, with 2018 picking up where 2017 left off, with stock of varying size and quality changing hands across all parts of the market.
Distribution warehouses (£3.8bn) and South East industrial estates (£1.4bn) both saw record volume, while rest of UK estates volume of £2.4bn was far ahead of anything seen over the past ten years.
2017 was also remarkable for the sheer depth of investment demand; the year saw 540 separate deals, up 51% on 2016 and 39% above the previous record year for volume in 2014.
