Property consultants Carter Jonas recently hosted their annual Commercial Edge business briefing giving an insight into the current property conditions in the South West.
Alison Williams, Associate Partner at Carter Jonas gives us her overview of the industrial market in the last year.
Industrial take up in 2018 was lower than the previous two years if it is looked at on an overall regional basis. The main reason for this is that we haven’t seen the mega-shed roll out in Bristol that we have seen in the two previous years, as the major occupiers such as Amazon, The Range and DHL now appear to have finished their current round of large acquisitions.
However, we anticipate we will see more development of this magnitude taking place across the region in the future as e-commerce competitors come to the market.
Swindon experienced an increase in take up in 2018 and leads the way on big shed deals. Developers Gazeley are shortly to complete 375,000 sq ft with a pre let to B&Q at a rent of £6.25 per sq ft.
DB Symmetry’s 211,000 sq ft building in Swindon has been let to Iceland at a rent of £6.75 per sq ft. This building represents the largest speculative build in the South West and the biggest investment deal, having sold at £41 million to Panattoni off a yield of 5%.
The South West region as a whole continues to suffer from a lack of good quality immediately available stock, particularly second hand space. However, we anticipate that Swindon’s stock levels will increase as industrial and warehouse buildings become vacated following the announcement of Honda’s impending closure in 2021.
Putting Honda aside, the continued depletion of industrial stock has so far had a positive effect on rents and capital values, which are staying strong as well as continuing to close the gap between rents and capital values for good quality re-furbished space and new build.
Speculative new build is really happening which is good news. BUT this does seem to be concentrated in Bristol and Swindon with little taking place outside these areas. In Swindon, Canmoor is developing 300,000 sq ft on the old Woolworths Distribution Depot with a pre let of 60,000 sq ft to DHL at £8 per sq ft.
E-commerce is set to drive growth in the industrial property market in the future. Speed and efficiency is now being achieved by robots. Online retailers such as Amazon and Ocado have developed robots that are able to whizz around vast warehouses at 18mph operating like pieces on a chess board utilising air traffic like control systems for clearance to move.
And the outlook for 2019? The uncertainty around Brexit had impacted on the decision making process for industrial occupiers. However, we anticipate that this will free up soon and we also anticipate that e-commerce will continue to be OK. Brexit is even creating opportunities with a need for additional warehousing for stockpiling.
Given its resilience and potential for growth, industrial will continue to be a popular sector for investment with yields staying steady and the multi let industrial estate with its diverse income stream being particularly trendy.
Pictured above: Alison Williams, Carter Jonas