Midlands facing stagnation over commercial property shortage
The Midlands industrial sector faces stagnation later this year unless a greater quantity of large scale commercial property becomes available, a new report has suggested.
GVA’s latest Industrial Intelligence report paints a worrying picture for the region, especially with the Midlands Engine about to fire up.
David Willmer, National Head of Industrial and Distribution at GVA, said: “Last year represented an outstanding period for the Midlands industrial sector, with some truly landmark deals helping to propel take-up.
“However, we estimate there is only around six months of stock currently available in the market based on average take-up rates. The overall lack of availability has been exacerbated by the slowdown in speculative development decisions immediately following the (EU) referendum and could be an issue in the second half of the year.”
Nevertheless, he said the lack of availability had not dampened enthusiasm amongst occupiers, with strong demand coupled with restricted supply leading to an increase in headline rents with Birmingham, Coventry and Nottingham all increasing.
The report said last year saw some 11.6 million sq ft of transactions completed in the Midlands on Grade A industrial and warehousing units over 100,000 sq ft – 29% above the five-year average of 8.9 million sq ft.
The report, which analyses industrial activity across the UK, identified that more than half of the transactions were in the retail sector, with 54% split evenly between retailing and e-commerce, driven by Amazon’s acquisition of 2 million sq ft of space across four deals, including 1 million sq ft at Bardon.
Sectors taking up a greater share than the national trend, included manufacturing (23%) and third party logistics (21%).
Mr Willmer said supply had been diminishing since 2010, with GVA calculating that across the Midlands there was some 4.4 million sq ft currently available across 22 units, with a further 2 million sq ft of speculative stock due for completion by the end of the year.
A more cautious approach from developers, however, is resulting in little stock over 200,000 sq ft currently being developed speculatively, with the notable exceptions of a handful of schemes, including the 372,000 sq ft Kingswood Lakeside in Cannock, the largest in the UK.
Overall, the Midlands accounted for 38% of all activity in the UK – the highest of any region – and is a reflection of the broader national picture with take-up of modern units over 100,000 sq ft amounting to 28.5 million across the year – 25% up on the five-year average.
Nationally, the retail sector remained the most active, accounting for 62% of national take-up, followed by logistics providers (18%) and manufacturers (18%).
“Looking ahead to the rest of the year, we are anticipating that we’ll see more of the same, with further market dominance from the retailing sector particularly in the last-mile, mid-size requirements,” added Mr Willmer.