Business park "blip" as demand drops

AVAILABILITY at business parks across the Midlands remains the lowest in the UK, although take-up has suffered a “blip” in recent months.

Business parks in the wider region had 9% of space vacant, compared with a national average of 15.3%, analysis of the second half of 2015 by Bilfinger GVA has found. The Midlands vacancy rate is near the threshold that traditionally begins to deliver rental growth.

Nationally it is the sixth-consecutive half-year period that has seen availability fall. During that time a net total of 3.5m sq ft has been taken, with 15.1m sq ft remaining vacant at the end of 2015.

Reflecting the national picture, take-up in the Midlands was muted, down over 20% on the five-year six-monthly average with 292,000 sq ft of deals completed.

Adrian Griffith, director at Bilfinger GVA, said: “This fall in take-up really goes against where the markets have been heading in the last two and a half years, representing a blip in an otherwise upward curve that demonstrates high demand and diminishing supply.”

While construction activity as a whole has fallen significantly over the last 12 months, availability has increased slightly in the Midlands through a combination of refurbishment of existing stock, as seen at Birmingham Business Park and Blythe Valley Park, completion of new buildings, and the expiry of historic 20 and 25 year leases.

The 63,000 sq ft pre-let to Tata Technologies for its European headquarters at Tachbrook Park was the largest deal in the second half of the year, followed by BT Group’s 20,000 sq ft letting at Aquarius, Birmingham Business Park and two lettings of 10,000 sq ft at Eagle Court, one of which was to Virgin Media.

Mr Griffith added: “We’ve seen a consistently improved demand over the last couple of years with growth in almost every quarter which, combined with a lack of speculative development, has put supply on business parks at a 10-year low.

“There is some stock coming back as 20 and 25-year leases are coming to an end, with a good deal of refurbishment taking place, bringing these buildings’ specification up to modern Grade A standards and at a level that is appealing for today’s occupiers.

“This puts landlords in a strong position, securing longer-term leases at better rents, with some returning to the equivalent values that we saw in the mid-1990s, with values beyond those that many of these buildings will have recorded before.”