As predicted, 2011 saw fewer transactions than 2010 particularly on industrial units in excess of 20,000 sq ft, predominantly due to the limited availability of quality buildings along the South Coast.
The tough global economy and uncertainty within the Eurozone means that occupiers are still acting with a degree of caution, particularly if they require bank debt to assist with any expansion plans. In similar vein to 2011, much of the discussion for 2012 will focus on the lack of larger, quality units along the M27 corridor and a steady level of demand across all size ranges.
Occupiers to target pre-lets to secure space
With a general lack of availability, we see larger occupiers having little choice but to consider Design & Build opportunities, and 2012 could be the year that pre-lets are also agreed. In fact, already this year GeoPost has signed a 36,580 sq ft pre-let agreement at Hamilton Business Park.
The 12 acre site at Voyager Park South in Portsmouth is another prime target, having existing B1, B2, B8 planning consent. Furthermore, Canmoor Developments and Cordea Savills’ site in Southampton, Endeavour Park, will provide 15.2 acres capable of accommodating up to 170,000 sq ft on a Design & Build basis close to the city, docks and the M271/M27.
F&C REIT Asset Management has commenced the marketing of its vacant 86,000 sq ft unit at Stoke Park in Eastleigh. Russ Berrie, the former tenant, vacated in early 2012, and the unit has already attracted interest from a number of potential tenants. With the A3 Hindhead Tunnel now open, drive times from Portsmouth and Havant to the M25 have reduced significantly, and we envisage that both of these locations will attract interest from logistics companies and ferry port bound importers as a result.
Headline rents to remain stable
Looking ahead, we envisage headline rents remaining at current levels, however a small rise in take-up will put pressure on the current stock of available units and tenants’ incentives will start to diminish.
We anticipate more focus on Design & Build lettings, particularly of industrial/warehouse units over 30,000 sq ft and especially where occupiers require bespoke facilities. Hargreaves Holdings, which owns five acres at Hamilton Business Park in Hedge End, is already in detailed discussions with two occupiers showing interest in Design & Build opportunities between 35,000 and 75,000 sq ft.
With discussions ongoing from 2011 into 2012, transactions are likely in the early part of this year at SEGRO’s Merlin Park in Portsmouth, which has outline planning consent for 85,000 sq ft. Likewise at its Voyager Park scheme, which is the only site along the M27 corridor currently capable of accommodating a single unit over 200,000 sq ft.
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