Despite a year of colourful political and economic activity, Swindon’s commercial property market proved extremely resilient in 2016, says Alder King in its latest Market Monitor report, with the industrial sector delivering its best performance for 12 years.
Industrial take-up in the town increased from 1.152 million sq ft to 1.414 million sq ft, 23% higher than last year’s total and 33% up on the five year average. This was primarily due to three transactions in excess of 200,000 sq ft, including the Triumph building at Groundwell, the Spectrum building at Rivermead, and the former ELC building at South Marston, but there was strong interest in units of all size ranges.
Industrial supply fell to 872,000 sq ft, its lowest level for over 12 years. Landlords and developers are looking to redress the balance by bringing forward new schemes. DB Symmetry, for example, is on site installing the access and infrastructure at its 1.2 million sq ft scheme to the east of Swindon, and Mooreland Estates’ plans to bring forward circa 100,000 sq ft in several new buildings at Hillmead are well advanced.
Although industrial rents remained static in 2016, the rapid erosion of stock saw a reduction in rent-free periods and incentives to occupiers and, with stock likely to remain in short supply, the market will see increased rental growth in 2017.
The town’s office market saw a dramatic fall in take-up but this was primarily due to a shortage of quality accommodation. It does not, stresses Alder King’s James Gregory, represent a weak market.
“There was just 112,000 sq ft of take-up in 2016, with 75% of that being in the out of town market,” he said. “Supply remained steady despite the 86,000 sq ft Trilogy building at Kembrey Park coming to the market. As the supply of suitable alternative options dwindled, several buildings and office suites that had been available for some time secured occupiers.
“The market will be boosted with over 100,000 sq ft of recently refurbished accommodation including 34,500 sq ft at Focal Point and other refurbishments planned at Cherry Orchard East and 3 Newbridge Square.
“As a result of market dynamics, landlords are reviewing rents, lease lengths and incentives but ultimately Swindon continues to represent good value.”
Demand for retail space in Swindon remained steady, with new occupiers in the town centre and the Outlet Centre. Pre-lets have been secured with Burger King, El Taco Loco and Rooster’s Southern Fried Chicken at The Crossing at the Brunel Centre.
The value of investment transactions was up slightly on 2015 at £45.9 million. The largest industrial transaction was Epic’s purchase of the Callaway Warehouse on South Marston Industrial Estate for £8.075 million at a NIY of 6.53%.
Market conditions are moving in the right direction and the dynamics for speculative development are improving, continues Gregory.
“Central government is seeking to stimulate activity through infrastructure projects and public sector relocations. Bristol has already benefited, securing a 107,000 sq ft pre-let at 3 Glass Wharf to HM Revenue & Customs and, with confirmation finally secured for the Hinkley project in late 2016, we expect momentum will build in 2017, driving occupier demand, particularly in the local industrial market.”
He added: “While the market should be braced for further uncertainty as the UK negotiates the many changes ahead, there is much to be optimistic about the coming year. There is underlying investor confidence in the economy and property market. And the UK’s reputation as a safe haven and attractive exchange rates will continue to fuel global and domestic demand for limited opportunities.”
Alder King’s Market Monitor 2017 provides a summary of the commercial property market in Bath, Bridgwater, Bristol, Exeter, Gloucester, Plymouth, Swindon, Taunton and Truro. It also covers Cardiff and the South Wales Region and include residential development land market and strategic planning reviews. The full report is available to download at www.alderking.com/publications. A mid-year update will be published in July 2017.
Pictured above: Alder King’s James Gregory