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Regional industrial take-up surges 33%

Take-up of logistic and industrial units over 50,000 sq ft across the North East region totalled 755,582 sq ft in the first half of this year, down 5% on the previous half year, but 33% up on the same period last year says Knight Frank in its latest industrial market commentary.

Simon Haggie, partner, industrial agency at Knight Frank says the total comprised of six transactions, the largest of which was a 461,128 sq ft letting of a riverside complex at Hadrian Yard to Smulders in February.

“Transactions in the larger size ranges have been extremely scarce in general however mainly due to the lack of modern stock rather than the lack of activity in these size ranges. The on-going Brexit discussions and the snap General Election have unsettled the market and as a consequence businesses are adopting a wait and see approach before committing to any new investment,” says Mr Haggie.

Rental evidence for new buildings is difficult to find because there has been very little development over the last 10 years. UK Land has recently completed a series of smaller units on the Team Valley Trading Estate and let an 11,000 sq ft unit off a rent of £8.10 per sq ft to Adept Fasteners and a 26,000 sq ft unit to All Good Ltd off a rent of £7.45 per sq ft.

“It is clear that Team Valley commands strong rents based on both its excellent location and the quality of industrial units being developed,” adds Mr Haggie.

UK Land Estates is developing a 57,425 sq ft unit on the Tyne Tunnel Trading Estate (TTTE) in North Shields which commenced on site this spring and has gone under offer at a rent of £6.00 per sq ft. The developer has received a grant from the local enterprise partnership which has allowed them to offer the building at this rental rate. It does however provide some confidence in the market for larger new sheds.

The supply figures for units of over 50,000 sq ft gives the impression of a vast supply at just over 4m sq ft, but in reality only the TTTE unit is new and of the remainder less than 500,000 sq ft could be described as modern. Nonetheless there is nothing of any scale in the immediate pipeline so if a developer did decide to speculatively build it would take almost two years for it to become available.

Mr Haggie concludes: “The outlook for 2017 appears to be much of the same, although there is a little more second hand stock coming to the market, much of it is old and in need of investment.

“With businesses rationalising and centralising, stock levels are likely to rise over the next six months and this may discourage developers. The key is to build sizes where demand is greatest in the 40,000 – 60,000 sq ft size range.”

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