Lack of available stock hindered momentum in the take up of occupied industrial units over 50,000 sq ft in Wales in the first half of 2018, according to Knight Frank’s latest Logic report into the industrial and logistics market.
Its research showed that the first half of the year started positively for transactions, with the announcement of the letting to TVR of 180,000 sq ft in Rassau Industrial Estate, Ebbw Vale. This was closely followed early in the year by purchases involving both Smurfitt Kappa (131,500 sq ft) and BCB International (51,000 sq ft) in Abercarn and Cardiff respectively.
Neil Francis, head of Knight Frank’s Industrial & Logistics agency division in Cardiff, said: “Frustratingly though, despite a number of active requirements in the market, the lack of good quality stock within Wales has hindered this early momentum and resulted in lower take up than expected.
“Our research shows that the total take up in Wales during the first half of the year, for occupied buildings over 50,000 sq ft, has only reached approximately 650,000 sq ft over seven recorded transactions. This figure is 450,000 sq ft less than the take up witnessed in the first half of 2017 and highlights the growing need for new development in the area.”
All but one of the recorded transactions was a purchase, which continued to highlight the recent trend of occupiers wanting to own their property. “As in previous years it is pleasing to witness local companies such as BCB International and Concrete Canvas (89,000 sq ft in Pontyclun) acquiring units that will allow them to grow and expand their business,” said Neil.
On the supply side, within Wales as a whole, approximately 3.15 million sq ft was now available for units above 50,000 sq ft – only 150,000 sq ft less than the figured reported at the end of 2017. There had also been less stock released to the market via closures than in recent years.
Neil Francis added: “As a response to the strong demand for good quality space St Modwen is pressing ahead with the speculative development of two units at Celtic Business Park, Llanwern where there will be 30,000 sq ft and 100,000 sq ft available from the Summer of 2019. The Welsh Government has also reacted to demand close to the Heads of the Valleys, and the impact of TVR locating to Rassau Industrial Estate, by advancing plans and commitment to develop 50,000 sq ft at its site in Rhyd y Blew in Ebbw Vale.
“It is also worth noting that for units of 20,000 sq ft to 50,000 sq ft demand continues to be so strong that, similar to the “big shed” market, all good quality stock is being acquired, and in many circumstances record capital value and rental levels are being paid with incentives on new leases not as hard as they were in recent times.”
Looking ahead, the Knight Frank research showed that there were a number of units over 50,000 sq ft currently under offer to occupiers. Should they all complete in the second half of 2018 then the take up figures for that period would be at similar levels to other years, and exceed 1 million sq ft.
“There are currently many requirements from logistics operators who are actively seeking new space close to junctions of the M4 Motorway. In most cases they want a bespoke facility with a large yard area and low site density to allow them to develop their fulfilment centres, said Neil Francis. “It is hoped that these all progress and their presence on site, coupled with the ongoing demand, will encourage speculatively development of units from 25,000 sq ft upwards.
“We are aware of many developers eager to capitalise on the interest shown in Wales, the strong workforce and relatively cheap land. However development in many areas is still not viable and whilst assistance from the Welsh Government will be required in some form there is a growing realisation amongst both developers and occupiers that rental and purchase prices need to increase to enable new development to be undertaken.”
