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Rental levels at prime North West Industrial and Logistics sites rise in 2019 with more growth to come

04 02 20 industrial

Rental levels for industrial and logistics sites across the North West of England saw an annual growth of 2.2 per cent to the third quarter of 2019* with a further increase forecast for 2020, reports the latest annual sector research by real estate advisors Colliers International.


According to the Colliers’ Rents Map, prime rents for Grade A units are hitting highs of £6.50 per sq ft to £6.75 per sq ft in Warrington and Manchester and 5.75 per q ft to £6 per sq ft in Liverpool and Lancashire.

John Sullivan, director, industrial and logistics for the North West at the Manchester office of Colliers International, forecast that rental levels on prime Grade A sites in key locations in the region would achieve £7 per sq ft in the next 12 months.

Such locations included Mountpark’s Omega complex at Warrington, Airport City Manchester and Haydock 525, where cereal giant Kellogg recently agreed a 20-year lease on a 525,000 sq ft warehouse at circa £6.30 per sq ft.

He said: “Although demand for large distribution warehouses moderated in 2019 that has to be seen in the context of strong levels witnessed over the preceding two years.

“A lack of Grade A space of 50,000 sq ft to 100,000 sq ft-plus being available for occupancy and a relatively weak pipeline of such developments means that demand continues to outstrip supply, with quoting rents for prime sites in 2020 now at £7 per sq ft for the first time.”

The demand for Grade A space was reflected by tenant interest remaining strong, with several units across the North West enjoying a healthy number of enquiries. At Haydock for example, almost 902,000 sq ft of new space is under offer across six units.

Major schemes completed in 2019 and still available to occupy include 375 at Logistics North (375,000 sq ft), Unit 4 Mountpark Omega (183,669 sq ft) and L107 Liberty Park, Widnes (108,901 sq ft).

John said investment volumes in the region had reached about £470m during 2019, a reduction of 20 per cent on 2018 because of investment decisions being affected by uncertainty over the outcome of Brexit negotiations.

“Brexit acted as a drag on investment. Nevertheless, for the right investment opportunity, well-let and in the right location, investor interest remained high,” he added. 

Key examples of such interest were Alpha Capital’s £5m acquisition of a prime distribution warehouse at Airport City Manchester from Stoford Developments and Warrington Borough Council’s purchase of Movanto’s 377,000 sq ft unit at Haydock for £45.3m.

Andrea Ferranti
, head of industrial and logistics research at Colliers International, commented: “Looking forward, investors will continue to search for yields in a low-rate environment, driving further capital growth for industrial and logistics assets in 2020.”

Nationwide, the Colliers’ report showed the industrial sector outperformed all other property asset classes in 2019. As a result, strong market fundamentals were expected to push the sector forward in 2020 as occupiers focused on streamlining supply chains. 

The report revealed that the sector has witnessed strong rental growth for several years and, although this was expected to moderate in 2020, logistics units located in densely populated areas would achieve above average returns. 

*Statistics from the MSCI Quarterly Digest.


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John Sullivan

Director

Industrial and Logistics

Manchester

I joined Colliers International UK in Sept 2016 as a Director to head up the Manchester, Industrial & Logistics team, which consists of 4 people coverging the whole of the North West.

I became chartered in Dec 2004 and have of over 17 years experience in the Industrial Agency market and previously worked in the industrial agency teams of Matthews & Goodman,  Knight Frank and Lambert Smith Hampton (Where I was head of department from 2014 - 2016) in their Manchester Offices.

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