Higher activity at Heathrow boosts industrial take-up – Jones Lang LaSalle
Jones Lang LaSalle says around 3.6m sq ft of industrial floorspace was taken up in the Western Corridor (west London and the Thames Valley) during the second half of 2011, taking the total for last year to 6.1m sq ft – a jump of 45% over the 2010 figure “and 90% higher than the 2009 recession”. The recovery in air freight at Heathrow helped to bolster the figures for 2011.
The market for industrial property in west London (including Heathrow industrial units) accounted for 55% of the total while Thames Valley industrial space made up the other 45%. As well as some large warehouse transactions at Heathrow, there were three significant data-centre deals last year – at Heathrow and on the Slough Trading Estate.
Two large pre-lets of industrial space in Reading boosted the take-up total in H2 2011 – Tesco signed up for a 950,000 sq ft facility at the former Berkshire Brewery site, while Brakes Group signed for a 207,000 sq ft property at Suttons Business Park. Grade A floorspace accounted for 38% of the total taken up in 2011, at 2.3m sq ft. This was a sharp increase from the 802,000 sq ft taken up in 2010. Take-up of Grade B floorspace was up 7% y/y at 3.0m sq ft, while Grade C take-up was up 33% at 748,000 sq ft.
Despite the increase in take-up, availability of industrial property in the Western Corridor also rose last year, although the gain was just 2% to 12.7m sq ft at the end of 2011 compared with a year earlier. The rise in availability reflected the return of some secondhand Grade B space to the market. The supply of Grade A space was actually 41% lower year-on-year at 1.5m sq ft.
Jones Lang LaSalle says that developers are waiting to see how last year’s speculative developments do before looking again at more speculative opportunities. “A small number of schemes are speculatively under construction in core markets and developers are in the process of assessing current sites for potential development, but with a sense of caution,” the firm adds.
Prime rents for industrial property in Slough, Reading industrial units and Park Royal industrial and warehouse property edged up last year, but were mostly stable elsewhere. Incentives are now starting to come in for core markets such as Park Royal, Jones Lang LaSalle says, suggesting that the market is now moving more in favour of landlords in terms of prime properties. The firm thinks prime headline rents could harden further this year in markets such as Park Royal, certain A40 locations and parts of Heathrow.
Jones Lang LaSalle expects demand for industrial floorspace in the Western Corridor to remain relatively flat in the first half of this year, but thinks that an improving economic outlook in the second half and a pick-up in air freight activity at Heathrow should support stronger occupier demand for industrial and logistics space in this region.
