Opportunities for industrial occupiers – Jones Lang LaSalle
The subdued economic outlook for Western Europe this year is leading to rising occupier caution when it comes to industrial property, says Jones Lang LaSalle. The firm’s latest survey of industrial occupier conditions has pointed out that while the greater caution, in combination with limited choice, has led to lower take-up volumes, occupier demand for modern logistics and industrial property remains strong in some markets.
Supply remains at more than a year’s demand in some markets, such as Paris and Madrid, based on average activity levels over the past five years, and this means that occupiers are in a position to negotiate relatively favourable incentives in these locations. The most generous incentives are in France, Spain and the UK, Jones Lang LaSalle says, with rent-free periods of around four months in France, and around two months in Spain and the UK, for typical lease lengths, which in the UK is five years. But with choice diminishing as speculative development remains limited, JLL expects prime rents to stabilise and incentives on UK industrial property to move in. For the Western European region as a whole, JLL expects rental increases to remain limited this year, but over a three-year period it forecasts rental growth of more than 1% per annum on average in some markets, including a number of German regions, Dublin, London, Barcelona and Stockholm.
JLL sees opportunities in secondary stock for those occupiers seeking to cut costs and those that can accommodate their facilities in lower quality/lower-spec facilities or outside prime locations. It says occupiers prepared to consider this type of property can find suitable units at rents that can be around 30% lower than for prime stock in certain locations. In the UK, it says prices of EUR 57 per sq m for Birmingham industrial property, EUR 115 per sq m for industrial units in London and EUR 48 per sq m for Manchester industrial units can be found for secondhand units of this type.
For those occupiers ready to buy industrial land and build their own facilities, JLL says some markets provide benefits in the form of cheaper land values and construction costs. France and Ireland offer some of the cheapest land in Western Europe, and Italy and the Netherlands offer competitive construction costs, it notes.
