Mood among industrial occupiers remains fragile – Jones Lang LaSalle
Jones Lang LaSalle’s recent research into the market for industrial units of below 100,000 sq ft shows that occupier demand remains fragile. Take-up of all industrial and logistics property fell 24% in Q1 2012 to 17.7m sq ft compared with the previous quarter, and was down 28% year-on-year. Take-up of properties below 100,000 sq ft declined 23%. While this is not necessarily surprising, given the economic backdrop, JLL says the size of the decline was more than might have been expected.
Meanwhile, availability has edged lower, with the total figure down 0.6% at the end of March 2012 compared with six months previously. Availability of units below 100,000 sq ft fell 1.9% during the same period. Nearly three quarters of the available industrial units (73%) was in properties of this smaller size.
JLL expects take-up this year to be below the 2011 total of 96.3m sq ft but thinks that if the economy improves in the second half of the year, demand could follow suit. Take-up of units below 100,000 sq ft totalled 71.9m sq ft in 2011.
As of May this year, JLL says there was around 793,000 sq ft of industrial floorspace under construction speculatively, across 18 UK schemes, and all in units of less than 100,000 sq ft. Six months ago, the corresponding figure was around 1m sq ft. The firm says that while new and good-quality supply could diminish this year, the availability of poorer-quality space could rise – “particularly if the upward trend in company liquidations continues”.
The forecast reduction in good-quality supply means that some locations could see modest rental growth – especially in west London, JLL adds. Gus Haslam, director in JLL’s London office, says confidence has returned in prime industrial markets in the region, sparking speculative development of industrial property in Heathrow, industrial units in Southall and Park Royal industrial property. He adds that, where good-quality secondhand refurbished units have been let, rents are edging upwards and incentives “are certainly starting to recede”.
