Average prime rents in the Midlands’ ‘big shed’ sector (in excess of 200,000 sq ft) are beginning the slow climb north.
According to Colliers International’s newly launched Logistics and Industrial Big Sheds Rent Map 2012, eight out of 12 locations across the regions saw rents rise. Only Nottingham saw a fall in rental values, while rents in Derby, Gloucester and Leicester remained static.
Birmingham, Coventry, Northampton, Stafford and Stoke-on-Trent, all saw a rent rise of 25p per sq ft.
Rents for secondary properties (ie, those built during the early 1990s), in contrast, have not performed so well. Only Derby saw a rise. Gloucester was the only location to see a drop, with all others areas remaining static.
Colliers’ Rent Map also put land values across prime locations in the Midlands under the spotlight.
None of the locations surveyed saw a fall in land values. With the exception of Northampton, where values rose by a third to £300,000 per acre, the majority of areas saw a £25,000 increase or remained flat.
Simon Norton, joint head of the logistics and industrial department at the Birmingham office of Colliers International, said: “Although I can’t get too excited, an average rise of 25p on prime rents and £25,000 on land values is a start.
“Last year, I got a distinct feeling of deja-vu reading the statistics: they had not moved on from 2010 and in a few cases had declined. In 2012, the general trend is upwards and, given the prevailing economic climate, that’s something to be grateful for.”
Although the climb out of the trough will be slow, Mr Norton believes rents and land values will continue to increase.
He said: “It’s a brave man who calls the bottom of the market, but I’m going to put my neck on the line. The fact is, we are running out of big sheds in the Midlands. You don’t need a degree in economics to work out that demand is outstripping supply and that this will put pressure on rents and land values.
“As a result, we will see secondary rents, largely static this year, move in the same direction as prime rents next year.”
Despite his confidence, Mr Norton says developers cannot afford to be complacent.
“Some developers are coming up with innovative ways of attracting tenants. Among them is Prologis, which is offering five-year leases on new space, designed and purpose built for the tenant.
“This is a significant departure for the industrial sector, where ten or 15 year leases are the norm on design and build.
“Most developers would struggle to get funding for a pre-let on five years, but Prologis has deep pockets and a land bank that is largely oven-ready, with planning permission and infrastructure in place.
“I imagine there are caveats: Prologis will most probably be looking at space in excess of 100,000 sq ft, and for tenants with strong covenants, but it’s an interesting development none the less, and likely to appeal to retailers and third party logistics operators in particular.
“With deals like this on the table I suspect I am not alone in thinking the bottom of the trough is behind us. Prologis is banking on rents continuing their northerly climb and a rent review five years hence could give them a nice return. I applaud their enterprise.”
| Location | Prime Rents
(new accommodation)
2011 2012 |
Secondary rents (early 1990s accommodation
2011 2012 |
Land values per acre (sites of 10+ acres)
2011 2012 ‘000 ‘000 |
| Birmingham East |
£5.00 £5.25 | £3.75 £3.75 | £275 £300 |
| Birmingham North/West |
£4.50 £4.75 | £3.25 £3.25 | £200 £200 |
| Birmingham South |
£5.00 £5.25 | £4.00 £4.00 | £275 £300 |
| Birmingham West |
£4.50 £4.75 |
£3.25 £3.25 | £200 £225 |
| Coventry | £5.00 £5.25 |
£3.75 £3.75 | £275 £300 |
| Derby | £4.50 £4.50 | £2.75 £3.00 | £200 £200 |
| Gloucester | £4.50 £4.50 | £3.50 £3.25 | £200 £200 |
| Leicester | £4.50 £4.50 |
£3.25 £3.25 | £200 £275 |
| Northampton | £5.00 £5.25 | £3.25 £3.25 | £200 £300 |
| Nottingham | £5.00 £4.75 |
£4.00 £4.00 | £200 £225 |
| Stafford | £4.25 £4.50 | £2.75 £2.75 | £175 £175 |
| Stoke-on-Trent | £4.00 £4.25 | £2.75 £2.75 | £150 £150 |
An interactive version of the Big Sheds Rent Map 2012 is available at:
http://industrial.colliers-uk.com/531.aspx