The Property People News

Record South East industrial take-up

Friday, October 07, 2011

Ask-re understand that there was a record take-up of the industrial and warehouse market in the Western Corridor in the first six months of 2011, according to Jones Lang LaSalle's recent report.

The West London M3/M4 Thames Valley markets found an industrial and warehouse take-up at a 10-year high in 2011, with 2.5 sq ft transacted for occupation in the first half of 2011.

The uplift was apaprently West-London driven, with a marked revival around Heathrow Airport.

Take-up in the Thames Valley fell compared with the figures for the first half of 2010, although it was well above the 10-average level.

Nevertheless the overall vacancy rate remained at 8.7%, despite the higher demand. A rise in available secondary floorspace helped the market to flex around tenant upgrade requirements.

As a result, constant demand and a reduction in Grade A availbility encouraged some developers to return to speculative development, and schemes are now underway in Heathrow, Southall, Uxbridge, Park Royal and Slough, which has to be good news.

At mid-2011, prime headline rents stood at £14 sq ft in the vicinity of the Cargo Terminal, with the expectation that rents would move to £15 sq ft but remain at £12.50 to £13 per sq ft around Heathrow.

In Park Royal, top rents of £13 per sq ft are achievable; they remain at £11.75 per sq ft in South. Secondhand older stock is trading below these levels, down to £6 per sq ft for the most basic storage sheds. The region remains "highly sought after from an investment perspective, with investor demand focused on prime single and multi-let investments, where prime yields are betwen 6.5% to 7%", according to Jones Lang LaSalle's findings. "In the last 12 months the Western Corridor has remained relatively resilient despite the national slowdown. Developers and investors continue to have faith in the region and we remain confident that this region is well placed to weather the challenging economic conditions we face. Overall, we see the market balance continuing to move gradually in favour of landlords."

Ask-re say "Not yet! And not decisively. There are many situations where tenants can extract more value from landlords."

New occupation is likely to be strong in the second half of the year, and this will continue to erode the availability of grade A stock in core markets until new provision begins to come through in 2012 and 2013.

Overall, reasons to be cheerful, if the economy is showing some confidence and growth.