Patchy recovery for industrial property in 2011 – JLL
Take-up for good quality industrial space in prime locations will continue to improve in 2011, says JLL, while secondary space and secondary locations will continue to struggle. The firm expects occupiers and investors to become “increasingly aware of the obsolescence of certain types of secondary stock and the need to demolish and redevelop, rather than face high refurbishment costs that are unlikely to bear fruit in terms of reducing voids”.
The firm’s predictions for the industrial market in 2011, made by partner Tim Johnson, show that a patchy recovery is expected this year. There may be some upward pressure on headline rents in certain locations, as a result of a shortage of stock in new and prime locations. Inducements may also be reduced.
Developers are expected to increase their buying of strategic sites after returning to land buying in 2010 – they will be seeking locations that are easily deliverable (with infrastructure installed) in prime sites. There will be a gradual increase, from a very low base in 2010, in speculative development in smaller, multi-use industrial unit schemes, mainly in London and the South East, and possibly a smaller number of “big box” units in the Midlands/Golden Triangle area. This is being pushed by the reducing supply of stock, but he also notes that “the additional liability of empty property rates will severely restrict the pace of increase and scale of speculative development moving forward”.
The growth in online retailing means that King Sturge is seeing a rising number of warehouse requirements to service internet operations from traditional (multi-channel) retailers as well as from internet-only retailers. It is also forecasting that demand driven by waste management and energy from waste will continue to expand this year. In particular, the latest round of offshore wind farms is likely to lead to significant new investment over the medium term, by manufacturers and their supply chains, at ports and on the East coast.
