Industrial Market Review

Luton and Dunstable Industrial and Logistics Market Review 2014

Infrastructure improvements and inward investment have driven take-up and rental growth throughout 2014 in Luton and Dunstable, whilst availability fell to its lowest level for over a decade. These trends are forecast to continue throughout 2015.

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In this issue:

A strong end to the year

  • In 2014, total take-up reached 885,000 sq ft, a 34% increase on 2013 and a 10% increase against the 10-year average.
  • 2014 finished strongly with Q4 accounting for almost 30% of total take-up.
  • Inward investment rose by 260% partly driven by infrastructure investment including the M1 Junction 10a (Grade Separation) and construction of the A5 – M1 link and Woodside Link.

 

Smaller stock continues to dominate

  • With the lack of new or grade A space, second hand stock dominated take-up figures, accounting for all but 20,000 sq ft.
  • The average transaction size remained at 22,000 sq ft reflecting the shortage in supply of larger buildings.
  • The largest transaction was the acquisition of 120,000 sq ft by Aryzta at Woodside Estate in Dunstable with only three other transactions in excess of 50,000 sq ft.
  • Activity rose by 120% compared to 2013 for buildings of between 10,000 sq ft to 20,000 sq ft.

Availability is falling

  • At the end of 2014, availability stood at 1.04 million sq ft. When excluding Prologis Park Dunstable (310,995 sq ft), this represents the lowest level for over a decade.
  • Excluding Prologis Park and those buildings currently under offer, true availability is less than 500,000 sq ft, representing less than seven months supply.
  • Most supply by number remains within the 10,000 sq ft size band and with little or no new development in this sector, supply shortages are expected to be an issue in 2015.
  • There are limited employment land opportunities. Release of development land within the Houghton Regis North urban expansion area may be the first sizeable opportunity to redress the imbalance between supply and demand.

Rents are rising

  • Refurbished stock in particular is capitalising on rental growth. Certain sectors of the market have experienced rental growth of approaching 15% as occupiers compete for limited stock.
  • With demand remaining strong and new development unlikely, rental growth is forecast to continue, with modern or good quality refurbished stock expected to see the biggest rises.
  • Prime rents on modern, good quality stock are forecast to achieve £8.00 per sq ft in 2015 whilst rents on refurbished secondary stock are expected to break through the £6.00 per sq ft barrier.
  • Incentives are expected to harden and lease terms increase as market dynamics move in favour of the landlord.

Investment transactions

Property

Size (sq ft)

Price Net initial yield Purchaser
Barratt Industrial Park, Airport Way, Luton

55,947 sq ft (8 units)

£4.95m

6.9%

Clipstone

Airport Executive Park, Airport Way, Luton

58,649 sq ft (8 units)

£5.05m 6.36% London Luton Aiport Ltd
Bilton Way Industrial Estate, Bilton Way, Luton

408,267 sq ft (47 units)

£31.9m 6.83% TIAA Henderson Real Estate
Units 3, 4 & 5, Centrus, Dunstable

50,430 sq ft (3 units)

£5.3m 6.07% LaSalle Investors

Record year for industrial investment

Industrial enjoyed a stellar year, with investors attracted to positive fundamentals of acute grade A supply shortages and rising demand through the growth of ecommerce. Industrial transaction yields have moved in sharply over the past 18 months, while total returns of 24.4% on the IPD index were the highest of the three main asset classes in 2014.

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Lloyd Spencer
Head of Office - Milton Keynes & Luton "Head of Office, Milton Keynes and Luton"

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