The Blog

Midlands big shed supply dwindling

Tuesday 10th February, 2015
The Midlands industrial market has reached a critical point after take-up hit pre-recessionary levels in 2014, with the availability of 100,000 sq ft plus sheds dwindling, reports CBRE.

CBRE says take-up during the final quarter of 2014 was 2.86m sq ft, taking the annual total take-up for the Midlands to 11.3 million sq ft, the highest it has been since 2006.

This represents 55% of the national total take-up of 20.2m sq ft.

The agent reports there is now just a three month supply of sheds in excess of 100,000 sq ft remaining, with less than 3m sq ft of new and second-hand space available across the region.

This is the lowest level of availability since 2008.

Based on the Midlands’ annual average take-up of 7m sq ft, by the end of April there could be no space left, adds CBRE.

As a percentage of new take-up in the Midlands during 2014, 76% of commitments were made on a pre-let or design and build basis, highlighting the lack of available stock.

Richard Meering, senior director in the industrial agency team at CBRE in Birmingham, said: “The severe lack of supply is indicative of the renewed occupier confidence within the industrial and logistics sector, with manufacturing, automotive, online retailing and third party logistics companies seeing continued growth.

“However, we have reached a critical point in the supply cycle, with available stock all but dried up across the Midlands region, and the units that are being built are being snapped up straight away, such is the level of demand from occupiers.

“It is imperative that more speculative developments are built as soon as possible to ensure we have the stock in supply to satisfy future demand. Basically, its crunch time for the industrial property sector.”

According to CBRE, developers are bringing forward speculative schemes, with 3.5m sq ft of speculative new Grade A industrial and logistics space committed to in the Midlands.

The schemes include: Roxhill’s Rugby Gateway (237,000 sq ft), Barwood Developments’ Central M40 (235,000 sq ft), Canmoor’s Silver Bullet at Hams Hall Distribution Park (150,000 sq ft), and Prologis’ Grange Park in Northampton (340,000).

Meering adds: “The problem is there aren’t enough oven ready sites capable of accommodating large units of 400,000 sq ft and above, and where there are sites the protracted planning process is slowing down the delivery of them.”

CBRE also reports that there is considerable appetite from investors in the industrial and distribution property sector, with the market heating-up.

In 2014, 21% of all UK commercial investments outside London and the South East were in industrial property, compared to 13% in 2013, and the long-term average of 8-10%.

Ed Gamble, senior director in the CBRE’s Birmingham-based capital markets team, said: “As well as investors looking to acquire existing units, we are seeing an increasing number of UK and foreign investment funds looking at speculative development opportunities in the region, given the favourable market conditions.

“Although pricing is now reaching close to the previous high in 2007, the difference now is that there is potential for huge rental growth due to the lack of available stock and increased occupier demand, which we expect to put further downward pressure on yields.”

Source: Costar