Rent levels not high enough to build speculatively says Mucklow
HALESOWEN contractor A & J Mucklow is benefiting from the upturn in the industrial property market but said it is not yet prepared to build speculatively.
In a trading update covering the period from July 1 to November 10, released ahead of its annual general meeting this morning, Mucklow reported that its occupancy rate has increased from 93.3% to 93.8% with a further 1% of vacant space currently in legal hands.
The company – structured as a real estate investment trust (REIT) – said quoting rents on its vacant industrial properties have hardened by around 25p per square foot over the last six months, due to a shortage of available space and steady occupier demand.
Industrial rents are now averaging between £5 and £5.75 per square foot, depending on unit size, specification and location.
Company chairman Rupert Mucklow said: “Occupiers are starting to realise that rental levels on secondhand industrial space are rising for the first time in 15 years and likely to continue to do so, while demand outstrips supply. However, rental levels will have to rise above £6.00 per square foot before we consider speculatively developing any new space.”
A 36,000 sq ft industrial unit at Redfern Park, Tyseley, Birmingham was let in October at a rent of £5.75 per square foot on a 20 year lease, without any break clauses. The vacant property was acquired and refurbished in the previous half year at a total cost of £1.74m.
Terms have also been agreed and solicitors instructed on two further lettings at £5.75 per square foot at Forward Park, Birmingham. The 26,000 sq ft industrial unit has recently been split and substantially refurbished at a cost of £0.17m and was previously let at a rent of £4.80 per square foot.
Mucklow added: “We continue actively to monitor the regional investment market for suitable acquisition opportunities, but none were identified during the period.”
The firm said its pre-let development at Apex Park, Worcester remains on time and budget with occupation and rental commencement of £0.72m per annum expected in December 2014.
Total net borrowings at October 31 were £68.1m, against a property investment portfolio last valued at £298.9m, while undrawn banking facilities totalled £35m.
