Partner Article

Lack of stock faces industrials

Compared to a year ago when the industrial market was extremely active, the end of this year, say Simon Haggie and Mark Proudlock, partners, industrial agency, Knight Frank, has been constrained by a lack of stock after a good start to the year which saw first half take-up of 1.28m sq ft of logistics and industrial space, double the take-up in the last half of 2013 and 72% above the five year bi-annual average.

This performance came after six years of recession and though there are fewer enquiries in the market, the quality of these is now markedly better.

As 2015 beckons there has been talk of interest rate rises which could have been sufficient for some occupiers to rethink strategies. Beyond the shores of the United Kingdom, trade embargoes on Russia and the counter embargoes on European countries is making the latter tighten their belts which is having a knock-on effect on the supply chains which include the North East, the only region of the UK with a positive trade balance.

So there is a maelstrom of issues which must be making occupiers cautious. That said it is far from bleak and the recent launch of UK Land Estates’ Kingsway scheme on Team Valley has prompted enquiries and while these are in their early stages it does show that some occupiers have an appetite to upgrade, recognising the importance of quality space built to the latest standards to reflect an appropriate corporate image and to retain staff.

The industrial element of the scheme proposed as part of the 10-acre mixed-use development includes the flagship No 1 Team Valley up to 80,000 sq ft including offices and Nos 1 and 2 Kingsway both 30,000 sq ft including high specification two-storey offices. This radical re-think of the industrial building is likely to appeal as a headquarters for a high- end manufacturer keen on location, image and attracting a skilled workforce possibly from the offshore, wind and gas, technology and IT sectors as well as manufacturing and engineering end-users.

This year has seen some significant lettings and property sales with the largest regional deal being the sale of the 188,000 sq ft Reckitt Benckiser pharmaceutical plant in Peterlee, Co Durham to Luton-based Bristol Laboratories. This was completed on confidential terms.

Other large regional lettings this year include the 130,000 sq ft former Acxiom building at Doxford, Sunderland; 80,000 sq ft to the Cordell Group in Stockton; 42,500 sq ft to Flowserve on Team Valley; 50,000 sq ft to Nippon Express at Boldon and 40,000 sq ft to B&B Attachments in Cramlington.

Rental levels remain around £5 per sq ft with Team Valley exceeding this due to its position as the region’s largest industrial and distribution location with over 700 businesses on site. Inducements have reduced and there is no doubt that new building space will establish new rental tones.

There are more companies talking about design and build as a way to acquire space that is tailored to their specific needs. As the North East heads into 2015 occupier confidence has certainly improved although companies do remain both cautious and cost conscious in their property strategies.

In terms of land supply, Highbridge Properties has secured Indigo Park, an 82 acre site in North Tyneside close to the A1. This is one of very few major strategic sites in the region to be actively marketed and promoted for development without the constraints many of the other sites suffer from.

In summary the regional outlook suggests that while occupier confidence is expected to continue to improve, owner occupier activity is expected to soften given expectations of forthcoming interest rate rises, the General Election and the issues arising from the European Union debate.

Ends

This was posted in Bdaily's Members' News section by Knight Frank .