South Wales industrial market a tale of two tiers – JLL
JLL’s latest South Wales Report notes that while rental growth for industrial property in the region is not expected during the next 12 months, the lack of new development means that the stock of available high-quality floorspace is shrinking, which will lead to a hardening of prices and tenant inducements for the best properties. Secondary stock, however, has seen a sharp fall in the rate of transactions following a downward shift in capital and rental values over the past twelve months.
“Whereas capital values in Cardiff may have shifted from £538-430m² (£50 to £40ft²), in the mid and upper Valleys there are examples of ex WDA units moving from £376m² (£35ft²) to £161-215m² (£15-20ft²), which starts to look attractive for owner occupiers,” the firm notes.
JLL estimates that available industrial floorspace in units of 500m² and over within Wales at December 2010 stood at 1,698,998m² (18,288,500ft²), an increase of 11% over 12 months. The availability of larger units over 10,000m² (107,640ft²) decreased over the year and represented 31% of the total at the end of 2010. New floorspace available at mid 2010 stood at 40,000m² (430,550ft²) just 2% of total then available, it adds.
For the Big Box distribution market there has been a shift in favour of Avonmouth while for smaller B8 distribution units of 2,000-4,000m² (21,528-43,056ft²) enquiry levels have increased, buoyed by internet commerce, it points out.
In general, JLL says the market is improving, although the recovery is expected to be subdued and fragile this year. The firm expects occupiers to continue to seek modern stock in accessible locations, “with a consequential impact on valuation for the secondary market”. It suggests larger secondary units in the region may be demolished and expects new development in the short term to be mainly specialist projects, which cannot be readily accommodated in second-hand stock, such as waste-to-energy plants and cross dock distribution development.
