Healthy demand for industrial space helped the Swindon commercial property market deliver a robust first half year performance, says property consultancy Alder King in its mid-year market report. The strong performance was achieved in spite of some investors and occupiers taking a cautious ‘wait and see’ approach leading up to the EU referendum and a lack of quality stock.
The report’s key findings are:
· Industrial demand was very healthy in the first quarter of 2016 but weaker in the second quarter, totalling 586,000 sq ft. Significant lettings included 107,600 sq ft at the Metro Building, Groundwell to TS Tech, 90,390 sq ft at Cheney Manor to JB Global and 102,000 sq ft at 6 Stephenson Road, Groundwell to Honda Logistics.
· The supply of industrial stock fell to 1.4 million sq ft, continuing the downward trend of the past 12 years. Applicants are struggling to identify suitable accommodation. As a result the overall rent and incentive package on recent transactions is edging upwards as landlords of better quality or refurbished accommodation review their quoting rents.
· Take-up in the town’s office market totalled 43,000 sq ft, significantly lower than the five year average of 194,000 sq ft. However this doesn’t accurately reflect the positive mood with which the year started and interestingly, buildings that had suffered from lack of demand now have two or more parties showing very positive interest. The town’s largest office transaction was at Edison Park where Swindon newcomer BeWiser Insurance took 10,225 sq ft.
· Supply increased slightly from its lowest recorded level at the end of 2015. This is due in the main to The Quadrant which offers 67,000 sq ft coming to the market and additional accommodation at Westmead.
· There continues to be strong appetite for conversion of older stock to residential use as developers take advantage of the stronger economy, relaxed planning regime and the forthcoming electrification of the mainline railway.
· The town’s retail and leisure market has benefited from major investment. The Brunel Centre has been revitalised and now includes a new food court called The Crossing which has attracted several new occupiers including Chopstix, Subway and KFC as well as a gym and a soft play centre. The town’s car showroom market has also been upgraded with the recent opening of the new MINI centre on Great Western Way. A planning application has also been submitted for the redevelopment of the Oasis leisure centre.
James Gregory, partner at Alder King, said: “The industrial sector has been the primary driver of this success story. We’ve seen strong freehold demand from owner occupiers, an encouraging return of mid-range enquiries (25,000-100,000 sq ft) and a number of sizeable acquisitions of buildings and sites for large format logistics occupation. This, coupled with the ongoing lack of supply, should encourage developers to proceed with plans for new schemes.
“We remain confident that the occupational market will continue to perform well in the second half of the year, despite the current political and economic uncertainty following the referendum result. The fundamentals of our regional economy remain strong. Swindon, and the South West more generally, has limited supply which should help deliver continued activity, even in the short term, particularly in sectors where there is pressure on supply.
“The investment market is likely to remain challenging but the fundamental attractions of UK CRE investment remain unchanged to both UK and foreign investors and, in time, confidence will return.”
Pictured above: James Gregory, partner at Alder King