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Industrial

North West: Acute lack of Industrial grade A space inflating rents

01/03/2012

Andrew Aherne

The lack of grade A space in Manchester’s industrial and distribution market has become so acute that prime space rents have risen for the first time in three years - according to our latest research: National Industrial and Distribution Market 2012.

The findings were revealed at a recent breakfast seminar, held at our Manchester office.

Prime rents increased in 27% of analysed locations

The survey analysed activity across 59 locations in 11 regional UK centres during 2011. It found that prime rents increased in 27% of the locations, with a further 39% of the towns/cities seeing prime rents stabilise.

Take-up levels stable across North West

Take-up of industrial space across the North West is stable at 14.3 million sq ft of space, despite a fall of 14% recorded in the distribution warehouse market. The decrease can be explained by the lack of available space and economic uncertainty. In contrast, demand for units between 25,000 sq ft and 50,000 sq ft increased as businesses consolidated their operations.

Landlords with own space benefitting from rental value increase

Andrew Aherne, Director of Industrial and Logistics in our Manchester office, said: “Our findings show that prime rental values have increased in Manchester, with little grade A space available. This imbalance will cause the sector to tip in favour of landlords who own quality space, allowing them to harden their stance on rent and incentives. Countering this, our research show that rents for secondary space continued to fall by an average of 1.85% across the UK.”

Lowest grade A availability in five years

Grade A availability in Manchester currently stands at its lowest in five years. In most size bands this represents 12 months of supply. Most acute shortage is in the distribution warehouse sector, where supply is down to six months based on 2011 take-up levels.

2012 trends: pre-lets and build-to-suit

Andrew added: “Trends we expect to see in 2012, are the number of pre-let and build-to-suit taking place. In 2011 they accounted for 60% of market take-up as occupiers turned to developing their own space or forging partnerships with developers to gain the space they need. There were relatively few other options available to occupiers as little or no speculative development occurred in 2011.”

Retailers, distribution and manufacturing sector accounting for 75% of activity

Retailers, internet retailers and third party logistics companies continued to dominate the distribution sector, accounting for 55% of activity. The most active internet retailer was Amazon, acquiring 2.1m sq ft, with further expansion expected in 2012 in the North West.

Anticipated start of development cycle end of 2012

Concluding, Andrew said: As the economy recovers, we expect confidence to improve in all sectors and demand to increase across Greater Manchester. Consequently, the pipeline of supply will decrease and we anticipate a start of the development cycle at the end of 2012.”

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