Midlands distribution sector set to benefit from speculative development boom
SPECULATIVE development in distribution centres is once again underway, with the Midlands set to bring forward the lion’s share of new premises across the year, a report says.
The latest version of commercial property adviser Bilfinger GVA’s Industrial Intelligence report shows that a combination of rocketing land values and dwindling stock has led to supply failing to keep pace with strengthening occupier demand.
During 2014, take-up of distribution units over 100,000 sq ft amounted to 22.6m sq ft, 11% above the five year average, the highest level since 2010 and in line with pre-recessionary levels. There has also been a sharp increase in take-up of second-hand space as the availability of better quality units has diminished.
Retailers took just under half the total space as they continue to create more efficient supply chains with an increasing need for regional distribution centres, serving smaller satellite units, closer to population centres and to support the growth of their internet business.
Activity has also been healthy in the manufacturing sector and in particular the automotive industry in the Midlands, the North West and the North East. The most significant deal was 470,000 sq ft let to Jaguar Land Rover at Prologis Park, Midpoint, Birmingham.
David Willmer, senior director in Bilfinger GVA’s industrial team, said: “Total take-up of big sheds in the Midlands in 2014 came in at around 10m sq ft, which is approximately 36% of national logistics take-up last year.
“We’re continuing to see significant demand from retailers, primarily in the clothing, discount and internet-fulfilment sectors, all of which is placing a significant squeeze on availability.
“Activity across the Midlands has been reflective of the national picture, with enquiry volumes up 8% on last year. As a consequence, landlords are driving rents, reducing incentives and looking for longer lease commitments of at least ten years.
“Land values have seen an uplift of 17% year-on-year and in prime locations from south Birmingham down to Northampton, we’ve seen values of £600,000 per acre plus, being achieved.”
The report has demonstrated that there is some 5.5m sq ft of high-quality industrial stock set to be delivered on a speculative basis by the end of 2015. Of this, circa 3m sq ft will be created across the Midlands, providing a significant boost to industrial and distribution sectors in the region.
