Partner Article

Real growth prospects for investors

Demand for units above 50,000 sq ft eased off during the first six months of this year with a total of 16.8 million sq ft acquired for occupation across the UK says Simon Haggie, partner, industrial agency, Knight Frank.

This is 27% down on the comparable period of 2014 and 10% below the five-year bi-annual average. While the Midlands continued to dominate activity in the first half of the year, the North West saw a significant recovery with just over 3 million sq ft of space taken. The Midlands also continued to dominate the pre-commitment activity with 1.45 million sq ft, which accounted for 45% of the total in the first half of the year. Supply shortages continue to leave occupiers with a lack of choice.

In the big-shed market, new-build supply of units above 100,000 sq ft currently stands at 8.4 million sq ft. In the Midlands current availability is equivalent to just six months’ supply. With around 4.6m sq ft of speculative space planned or under construction across 27 buildings for delivery in 2015/16, this takes the overall supply - including existing space - to around 12 months. However, over 2m sq ft of the space available or planned is also under offer, which indicates a continued shortage of supply.

Given the lack of available industrial space we anticipate further rental growth across the regions in the UK over the next 12 months. We expect to see substantially more speculative development delivered to the market over the coming years. The rate of rental growth will eventually slow as new speculative development comes through and supply increases.

The UK industrial investment market was relatively subdued just under £3.0bn of industrial assets changed hands. However the level of turnover largely reflects a lack of suitable buying opportunities in the market, rather than investor demand which remains strong for prime properties, underpinned by improving occupier fundamentals.

Investors are benefitting from accelerated rental growth. The IPD Monthly Index shows industrial rents increased by 3.8%, which is the highest rate of rental growth since May 2001, and with Consumer Price Inflation back to zero this represents real rental growth for investors.

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