Industrial take-up rises in Q4 as prime availability falls – DTZ
Take-up of industrial property across the UK during Q4 2011 reached 7.45m sq ft, says DTZ – the highest quarterly total for more than a year. The firm, now part of UGL Services, says that despite this high fourth-quarter figure, the total take-up for 2011 was weaker year-on-year at 28m sq ft compared with 31.6m sq ft in 2010. Simon Lloyd, Head of Industrial & Logistics at DTZ, says there have been fewer opportunities available to buyers as a result of the lack of available Grade A space.
Mr. Lloyd adds that there has been a shift in the profile of industrial occupiers during the past year, with manufacturing now accounting for 33% of all transactions (up 13% compared with a year earlier). “This shift is further emphasised by a reduction in deal size as manufacturers typically occupy smaller units than retail and supply chain providers,” he notes.
The industrial property market has been popular among investors, with investment activity in the sector rising to nearly £1.4bn in Q4 2011 – the highest level since Q4 2006 and more than 65% above the long-term average.
Stock has continued to decline in the sector, with most UK regions reporting a severe shortage of prime space in Q4 2011, DTZ notes, “although this has been limited by a large number of secondary units coming on to the market”. With speculative development remaining unlikely in the current economic conditions, DTZ expects pre-lets, land sales and build-to-suit deals to be the main trends influencing take-up this year. Rental levels of industrial units to let remained flat in Q4, but DTZ says agents expect incentives to harden on prime properties, given the developing shortage of industrial space.
In the North West DTZ reports take-up of 5.35m sq ft for 2011, after 1.4m sq ft was taken up in Q4. The fourth-quarter figure was boosted by a 620,000 sq ft warehouse build-to-suit deal for Asda in Rochdale. Take-up activity in the North East was also above the long-term average, at 1.7m sq ft for the year after 750,000 was taken up in Q4, including 346,000 sq ft of new industrial space in Billingham for an Asda distribution hub. There are only five new buildings of more than 50,000 sq ft in the region, DTZ notes.
In London, the South East and the East, Q4 take-up of 750,000 sq ft took the total for the year to 3.4m sq ft, below the long-term average. The Q4 total included a 340,000 sq ft Grade B letting of industrial space in Braintree at Tekhnicon House. DTZ notes that this region now has less than six months’ supply of prime stock at current take-up levels. In the South West the market was dominated by Grade B deals. Take-up fell to 410,000 sq ft for the quarter. But DTZ says the outlook in this region is promising with a number of active requirements for more than 400,000 sq ft.
In the West Midlands, a rebound to 1.2m sq ft taken up in Q4 meant the 2011 total reached 4.7m sq ft, the highest since 2008. Several automotive-related manufacturing deals bolstered the total, including Plastic Omnium taking 120,000 sq ft of industrial space in Coleshill after securing a contract with Jaguar Land Rover. In the East Midlands take-up also recovered strongly in Q4, to 1.4m sq ft, to make an annual total of 3.8m sq ft. The firm says deals in this region were largely expansionary and retail-driven: the letting to Pets at Home of 300,000 sq ft of industrial space at Swan Valley near Northampton was the largest in the quarter. While prime stock remains scarce, 800,000 sq ft of Grade B space came onto the market in Q4, DTZ notes.
Take-up in Yorkshire & Humberside rose slightly to 460,000 sq ft to take the yearly total to 1.6m sq ft – well below the long-term average of 3.5m sq ft. DHLs 160,000 sq ft taken in Doncaster was the largest deal of the quarter.
The market in Scotland was strongly active, with take-up of more than 900,000 sq ft in the final quarter to make a 2011 total of 2.8m sq ft, 24% above the long-term average. The Asda distribution centre of 500,000 sq ft in Grangemouth was a key deal and there are several active requirements in the market for this year, DTZ notes. Meanwhile in Wales there was only one reported letting of 70,000 sq ft in Q4, although a number of sub-50,000 sq ft deals were transacted. Demand for space in the first quarter of this year is promising, however, with Speedyhire seeking 100,000 sq ft of Grade A space along the M4, the firm adds.
