Industrial demand outstripping supply, says Knight Frank
A LACK of supply is holding back the North West industrial market, according to agent Knight Frank.
It said demand is high with requirements of around two million sq ft but the number of deals for units above 50,000 sq ft was down 32% in the six months to December compared with the first half of 2013.
There are just three available new build units over 50,000 sq ft, totalling 440,000 sq ft. They are the two units at the recently completed Lancashire Business Park in Leyland, and one at Matrix Court in Chester.
Design and build transactions are becoming more prevalent, said Knight Frank, with pre-lets signed at several schemes in the second half. Dole Fresh UK is taking 61,000 sq ft at Barwood and L&G’s M6 Epic near Wigan, DHL have signed for 37,308 sq ft at Airport City and Johnson Controls acquired 150,000 sq ft at Marshalls CDP’s scheme, The Hive in Speke.
Investment activity picked up significantly over the second half of last year with transaction volumes of £228.1m, nearly double those seen in the first six months.
These included Standard Life’s sale and leaseback, of Travis Perkins’ 631,000 sq ft distribution centre at Omega North in Warrington for £52.8m and Scottish Widows’ purchase of Boulevard Industrial Park, a multi-let industrial estate in Speke for £37m from LaSalle Investment Management.
Rob Taylor, partner in Knight Frank’s industrial team in Manchester said: “With the supply of good quality buildings expected to remain low, we anticipate design and build transactions to become more prevalent throughout 2014. Initial transactions at Logistics North, Airport City and M6 Epic are likely to provide the catalysts necessary for possible speculative development.
“As the supply of existing Grade A stock reduces further, incentive packages will continue to harden, along with increased upward pressure on headline rents, particularly in the 50,000 sq ft plus unit range. We expect investment activity to remain strong over 2014, as demand continues to spill over into the regions outside the South East.”
