Industrial Market Review

West Midlands industrial & logistics market review

The call for a return to speculative development was finally answered in May this year, with IM Properties’ announcement that they will be speculatively developing two logistics units totalling 334,500 sq ft at their Birch Coppice Business Park in Tamworth. This shows major confidence in the economic recovery and the region itself.

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In this issue:

South of the region leads way with industrial take-up

  • There has been a positive level of take-up from third party logistics operators (3PL’s), automotive and aerospace sectors, parcel operators and retailers.
  • With continued occupier demand for grade A industrial space, developers are facing increased pressure to consider speculative development as remaining space rapidly declines.
  • Landlords are holding out for strong headline rents and longer leases. Incentives have also hardened with some landlords now unwilling to offer in excess of six months’ rent free on a five-year lease. 
  • There is a notable difference between the north and south of the West Midlands region with higher rents, take-up, and investment to the south, along with lower yields and availability rates.
  • Close proximity to the golden triangle motorway network and key automotive hubs in Birmingham, Wolverhampton and Coventry is of significant importance to occupiers. It is here where we expect to see the most rental growth and the majority of any speculative development in coming months.

View significant occupational transactions H1 2013.

Acute shortage of grade A supply

  • There is an acute shortage of grade A supply across all sectors – big shed, mid-box and SME. 
  • Across the region there are now only five new buildings left on the market in excess of 50,000 sq ft, providing just 1,026,510 sq ft of space. However, two of these are now under offer so the true availability is much lower.
  • The multi-let market continues to see a regular amount of churn; as a result vacancy rates have reduced substantially on many of the larger multi-let estates.
  • Going into the last six months of the year, occupiers will be forced to consider grade B stock, refurbishments or design and build solutions.

A welcome return to speculative development

  • IM Properties’ announcement that they will be speculatively developing two logistics units totalling 334,500 sq ft at their Birch Coppice Business Park in Tamworth is welcome news for the region.
  • Construction work is set to begin at the start of July and will be completed in January 2014. 
  • To encourage further speculative schemes, the Government will also exempt all newly built commercial property completed between 1 October 2013 and 30 September 2016 from empty property rates for the first 18 months.

 

What does the remainder of 2013 have in store?

  • A large proportion of available space consists of poorer quality units which are likely to be deemed obsolete.
  • Landlords will continue to hold out for better terms as grade A supply declines further.
  • Retailers will increasingly seek to secure dedicated e-commerce facilities in the region.
  • We anticipate further speculative development, most likely between 100,000 – 200,000 sq ft.
  • There is a good level of unsatisfied demand and we expect this to be reflected in increased industrial market activity in the region.

How has the investment market performed in 2013?

While 2013 has seen a resurgence in demand for both distribution and multi-let industrial investments, a number of deals are yet to complete. Q1 was particularly slow with only IM Properties’ acquisition of The Hub in Birmingham, and LIM’s purchase of First Point in Burton grabbing the headlines. That said, we continue to see significant demand in the market for good quality product and while few deals have completed so far in Q2, a number of notable transactions are under offer including:

  • Oxford Street IE, Bilston (114,912 sq ft)
  • Smyths Toys, Newcastle-under-Lyme (414,876 sq ft)
  • Big Blue, Birmingham (210,0000 sq ft)
  • Cofton Centre, Longbridge (47,559 sq ft)
  • The Duke, Burton-upon-Trent (303,047 sq ft)

Read our latest research and market views. 

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Alex Carr

020 7198 2233

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Alex Carr
Director - Capital Markets - Industrial & Logistics

020 7198 2233

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