An acute shortage of industrial space over 100,000 sq ft in the South West has driven rental levels in the prime and secondary markets to show the highest annual increases in the UK over the past year.
The latest UK Industrial Market 2018 research from Colliers International has recorded 19% increases for prime rents for big units, and 16% for prime rents for the secondary market. In contrast, space of over 100,000 sq ft in London showed rent increases of 7% for both prime and secondary, with the South East recording increases of 6% in both markets.
Tom Watkins, associate director in the Industrial & Logistics team in the South West office of Colliers International, said: “UK prime rents for units over 100,000 sq ft have maintained a strong upward trajectory over the past 12 months, with the most spectacular rise being in the South West at 16%.
“This has been driven by acute shortages of available Grade A space over 100,000 sq ft, which has led to an increase in prime rents and has also driven rental levels in the secondary market, where again the most outstanding increase has been in the South West at 19% against a UK average of 6%.
“These included some notable hotspots in the region. Rents for large secondary units in Gloucester increased by 25% to £6.25 per sq ft; Exeter saw a 24% increase to £6.50 per sq ft; Plymouth had a 12% increase to £4.75 per sq ft, and in Bristol rents rose by 11% to £7.25 per sq ft.”
The Colliers International UK Industrial Market 2018 research for the first quarter of the year examine shows areas in the South West also led the way in rental uplifts for smaller industrial units. UK prime rents for prime smaller units of around 10-50,000 sq ft rose by an annual average of 5.4% during 2017, with higher increases being recorded in Bristol at 6% to an average of £9 per sq ft; Exeter at 7% to £8 per sq ft; and Gloucester at 15% to £9 per sq ft.
The report notes the ‘phenomenal’ demand for industrial space in recent years, with occupational demand outstripping supply for the past three years and annual take-up averaging 30 million sq ft for units over 100,000 sq ft. The first quarter of 2018 saw take-up of 7 million sq ft, putting this year on track for another 30 million take-up.
Mr Watkins said: “The upward pressure on rents around the UK has been caused by the imbalance of supply and demand, and this is very much apparent in the South West.
“A key driver of demand in the industrial sector will continue to come from e-commerce, which has generated strong take-up levels in recent years both in the ‘big shed’ market for premises over 100,000 sq ft, and for smaller suburban last mile delivery units, particularly in cities and larger conurbations.”
He added that some developers were responding to the industrial supply shortage with speculative schemes which had made some difference to the overall availability rate.
“In the South West we have seen all units let and sold at Apollo Park in Bristol, which was built without end user commitment by Chancerygate, which is now speculatively building Vertex Park at Emersons Green.
“There has been considerable interest in a 221,230 sq ft logistics facility recently launched at Symmetry Park in Swindon by db symmetry, and the £150 million Bridgwater Gateway business park currently under construction near J24 of the M5 motorway will feature 10 speculative industrial units.
“Interestingly the take-up of industrial development land in the South West was up 100 per cent in 2017, at 112 acres compared to 55.5 acres in 2016, which appears to be indicative of developers reacting to the hot market for rents and prices in the region.”