Enquiries, viewings and lettings have continued to rise in the West Midlands industrial market during the first quarter of 2018, after a steady 2017 says Richard James Moore, JLL’s industrial & Logistics director.
Commenting on JLL’s second annual UK Industrial Market Tracker, which monitors data, evaluates trends and predicts future demand for units under 100,000 sq ft, James Moore suggested industrial was likely to be the top-performing investment sector ahead of both retail and offices for the next four years.
“The West Midlands’ love affair with manufacturing – particularly in automotive, aerospace and advanced engineering – combined with the demand for e-commerce really makes a difference year after year, so we have two strong sectors driving demand which is very healthy.
“Over the year, probably 40% of the total deals here were manufacturing. Yes, transactions are taking a little longer to complete than previously, but that’s a reflection of wider economic concerns, and the market itself remains robust.
“Traditionally, agencies have studied the so-called Big Box market, for units of 100,000 sq ft and above, but we realised that wasn’t providing a complete picture to investors, developers and advisers,” he says.
“Taking the West Midlands as an example, if a major automotive marque such as JLR took space, it would be on such a scale that the deal would fall into Big Box analysis, but when its supply chain acquired space those deals wouldn’t necessarily be on the radar as they’d potentially be under 100,000 sq ft.
“However, the tracker shows just how strong demand is for small and medium-sized chunks of space in this region. Of all those units under construction in January 2017, almost three-quarters (73%) had been let by the start of 2018.”
With demand rising, and supply contracting, James-Moore also reports that rents are rising for both new and refurbished space.
“The gap between good secondary space – typically built to the specifications required by institutional investors in the 90s, and recently given a quality refurbishment – and new Grade A space is diminishing across the region,” he says.
“At the moment, rents per square foot for the prime big units would be around £6.75, but you’d be close to £7 for mid-box if in a strong location, with Connexion units being delivered at Blythe Valley, rumoured to be getting close to £8.
”Developers who once focused almost exclusively on the Big Box market are now much more interested in the sub-100,000 sq ft niche, and those which are quickest to reach to changing patterns of demand are reaping the rewards.”
In addition developers are also tapping into the manufacturing demand in the region and James Moore cites the new Prosperso Ansty scheme in Coventry.
Named after Britain’s first space satellite, which was launched on Black Arrow rockets manufactured there, the sprawling site covers 185 acres, which could see 2.3m sq ft of new industrial space delivered.
“The area around Ansty and Coventry has been famed for decades for advanced engineering, especially automotive and aerospace, and this scheme is very much targeted at those sectors,” says James-Moore.
“Meggitt plc has already signed for a £130m operational centre, which will offer 440,000 sq ft, and given its location – close to J2 of the M6 and the M69 interchange – and the strong local talent pool, we’d expect solid interest from other global engineering brands looking to set up major centres here.”
