Western Corridor industrial property has turned the corner – Jones Lang LaSalle
Developers and investors have good reason to focus on the market for industrial property in West London and industrial units in the Thames Valley, says Jones Lang LaSalle in new research. This market is widely perceived to be leading a fragile property market recovery, the firm says, which has yet to gather speed and is “barely registering” in other regions.
The firm points out that occupier take-up of industrial property in the Western Corridor was “robust” during the first half of this year, says Jones Lang LaSalle, with a total of 2.6m sq ft taken up – 43% above the average over the past ten years. This followed a particularly strong 2011, when take-up of Western Corridor industrial property was its highest since JLL’s records began in 2005.
After turning the corner this year, the Western Corridor market for industrial property is now on a growth path, JLL says. It expects a gradual improvement in economic growth to encourage more occupier demand, and thinks speculative development will increase as a result of the scarcity of good-quality stock.
Available Grade A industrial and warehouse floorspace totalled just 1.0m sq ft by the middle of 2012 – the lowest level in 13 years, JLL notes. Only 8% of total available industrial property in West London and the Thames Valley was Grade A at the end of June 2012, the firm points out.
Demand remains driven by strong interest in build-to-suit solutions, JLL notes. The lack of good-quality large units available has led to a number of pre-lets already, with more such pre-let requirements in the market. If some of these complete in H2 2012 “this will confirm the demand for build-to-suit facilities and highlight the continuing resilience of the Western Corridor market,” JLL says. Freehold demand has been strong in West London while in the Thames Valley a turnaround in demand for industrial property in Reading has led a significant uplift in occupier demand in the past couple of years, the firm notes. A number of Thames Valley markets recorded strong activity in H1 2012 including Bracknell, Wokingham and Slough.
Rental levels for prime industrial property were mostly stable in the year to mid-2012, but edged higher for industrial space near Heathrow, and incentives were generally reduced.
JLL research director Industrial and Logistics, Jon Sleeman, says the research suggests that the market balance in the Western Corridor “is moving slowly in favour of landlords and away from occupiers”. He said the very low level of good-quality stock highlights this trend and expects this market to lead the recovery in rents in the industrial sector.
