A shortage of office and industrial units in Worcestershire, coupled with high demand for space, will push up commercial property prices across the county in the next 12 months, according to Worcestershire’s largest independent commercial property agency GJS Dillon.
Take-up of industrial and office space in 2018 virtually mirrored 2017’s take-up, with transactions totalling 1.22 million sq ft of industrial property up some 30,000 sq ft (2017: 1.19 million sq ft) and office space down some 4,000 sq ft at 195,000 sq ft (2017: 199,000 sq ft). However, there was insufficient new development, especially of smaller units, to meet demand, leading to falling vacancy rates, higher rents and purchasers’ paying a premium for the scare freehold opportunities.
“Worcestershire’ office market is experiencing 10% annual rental growth in comparison to average zero (0%) growth across the country,” says Andrew Lewis, Head of Agency at GJS Dillon, writing in GJS Dillon’s Worcestershire Commercial Property Market Report 2018/2019.
“Rental growth is being driven by a lack of choice of space, with a vacancy rate of 4.3%, and only 161,000 sq ft of new office space presently under construction in Worcester. However, with average office rents across the county at £12.25psf, office accommodation in Worcestershire still looks very good value when compared to Birmingham and Solihull.”
According to Mr Lewis, industrial property rents are also expected to grow on the back of one of the lowest vacancy rates in the country.
He says: “Industrial vacancies across Worcestershire are 3.5%, less than half the national average, caused by a healthy demand and a lack of new stock over recent years. However, when we break down the vacancy rate the large industrial market is 5%, but it is only 0.5% for the smaller (less than 5,000 sq ft) and medium markets (less than 15,000 sq ft).
“As a result, we will see growth in the average rents of £5.10psf for the big shed market and of £6.75psf for the smaller and medium market.
“There is significant demand for all sizes of industrial property, particularly freehold, where we have seen a 25% increase in enquiries, however there are many fewer industrial premises for sale than for rent.
“Developers have reacted to the shortage of industrial property, building 200,000 sq ft of new accommodation in the past 12 months, with a further 637,000 sq ft under construction. However, this is weighted very heavily to larger properties of over 45,000 sq ft.
“Worcestershire LEP, property agents and developers are all aware of the current shortage of smaller industrial and office units and are working together to see how more can be built. One solution would be to designate more land for employment use around Worcestershire’s motorway junctions on the M42 and M5, where demand is already greatest for both office and industrial space.”
GJS Dillon produces an annual review of Worcestershire’s commercial property market, based on figures and analysis from CoStar, which it uses to advise vendors, purchasers, developers, landlords and tenants. The report looks in detail at the county’s six sub-markets for both office and industrial property.