Industrial Market Review

Milton Keynes industrial and logistics review H1 2015

Record shortages in supply are driving rental and capital growth in Milton Keynes whilst incentives continue to harden. Take-up is constrained by limited availability which is driving occupiers to look to alternative locations.

In this issue:

Take-up is dropping

  • Take-up in the first quarter of 2015 totalled 808,000 sq ft, boosted by the pre-let of 638,000 sq ft to John Lewis at Magna Park, although underlying statistics reveal only 15 transactions when compared to 25 transactions in the preceding quarter.
  • Take-up for Q2 totalled 215,000 sq ft from 14 transactions, resulting in half year activity of 1.023m sq ft, down 49% (by sq ft) and 34% (by number of transactions) on the preceding year. 
  • Take-up of units between 5,000 and 10,000 sq ft has experienced a surge in activity, accounting for 52% of all transactions, whilst there have been only two lettings in excess of 50,000 sq ft, reflecting the shortage of supply in the mid box sector.
  • Freehold enquiries below 30,000 sq ft have increased significantly, yet there has been only one transaction in the first half of the year, due to the lack of freehold product.
  • Rental growth is evident across all sectors fuelled by diminishing supply whilst incentives are reducing. One month rent free for each year term certain is now the best most occupiers can expect to receive.

Supply has recorded an increase

  • Supply in Milton Keynes has recorded an increase for the second consecutive quarter to 2.182 million sq ft, due to the speculative development of 185,000 sq ft at Magna Park and introduction of 313,000 sq ft of poor quality space at Kiln Farm.
  • Of that 2.182 million sq ft (71 units), 253,000 sq ft (20 units) or 28% (by number) is reported under offer whilst 890,000 sq ft is accounted for in only four units.
  • Only 185,000 sq ft (one unit) at Magna Park offers grade A space.

Rental growth is expected to grow

  • Despite good demand and limited big box development, take-up for 2015 is expected to fall below 2014 levels due largely to the lack of available stock below 100,000 sq ft.
  • Rental growth is expected to continue with the growth on refurbished stock expected to outperform unrefurbished product. Prime rents now range between £7.50 to £8.00 per sq ft depending on size. Capital values are forecast to grow significantly subject to the availability of stock.
  • Whilst the odd pocket of infill development (between 30,000 and 50,000 sq ft) may come forward in the next 12 months, an acute shortage of development land to satisfy demand in the mid box sector and smaller means the availability of grade A product is unlikely to change in the short to medium term, potentially fuelling a migration of occupiers to other areas.

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Lloyd Spencer
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