Speculative industrial development set to boost market

RESEARCH from property consultancy DTZ has pointed to a rise in speculative development in the big shed market.

But JLL points out that until that new supply kicks in, prime rents are on the increase.

DTZ’s latest research shows development of industrial space above 50,000 sq ft expanded outside of the M1/M6/M25 corridors in Q1 for the first time since development recommenced in late 2013.

Grade A availability increased to 12.2m sq ft in Q1, confirming the end of a downward trend since 2009, where lack of development meant that this best quality available space fell by 77% over five years.

Simon Lloyd, Birmingham-based head of industrial agency at DTZ, said: “The shortage of grade A space has meant that occupiers have had to take a built-to-suit option with its longer lead-in time, or an older grade B building in order to satisfy their property requirement.

“The increased grade A supply generated by an accelerating speculative programme will mean that they are now more able to take a better building with its operational benefits.

“The Midlands has been one of the main beneficiaries of the new building programme with a number of buildings of a range of sizes being built and taken up by occupiers.”

But JLL points out prime rents are going up.

Its UK Industrial Property Trends report showed that over the 12 months to December 2014 most major industrial markets in the West Midlands registered growth in prime rents.

In Birmingham rents increased from £5.75 to £6.00 per sq ft in 2013 to £6.00 to £6.25 per sq ft in 2014.

The Black Country and Coventry also saw a rise, with Solihull remaining static having already achieved £6.50-£6.75 and this trends appears to be continuing into 2015.
 
Cameron Mitchell director of industrial & logistics at JLL in Birmingham, said: “The trend is driven by a shortage of supply, a stronger market and increased build costs.

“Within the West Midlands industrial market occupiers remain focused on securing good quality existing units that are either already available or currently under construction as often they have left insufficient time to go down the design & build route and there just isn’t enough quality space to go round.
 
“Whilst we expect to see further speculative development announcements this year, we suspect on a number of these won’t begin construction until the end of the year or into next year.”