Research - 01/10/2018

South Coast Industrial Market Pulse Q3 2018

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A positive Q3 sets the tone for a strong end of year and overall performance for 2018 in the industrial market on the South Coast. The wave of grade A accommodation and attractive attributes that draws and retains businesses on the South Coast have resulted in positive take up figures this quarter. 

Enquiries on the rise

Coupled with the surge in transactional activity, we have also witnessed a rise in enquiry levels from 132 in Q2 to 150 in Q3. This is also up 12% when compared to the same quarter last year showing resilience in the market despite the perceived economic uncertainty.

The influx of enquiries was particularly focused on the sub-5000 sq ft and over 50,000 sq ft size brackets, when compared with the previous quarter, with continued appetite for space from the logistics warehouse sector, along with an increase in enquiries from the manufacturing sector.

Take up in Q3 recovers

As predicted, following the dip in take up last quarter, Q3 has recovered back up to the same level as this time last year and is on par with Q1 2018 totalling some 500,000 sq ft. The influx of new stock has been a significant contributing factor and has clearly satisfied some of the pent up demand.     
In addition the delivery of new developments has resulted in the release of good quality secondary stock, creating a buoyant market environment, where rents between prime and secondary are marginalised.
We are also aware of further grade A schemes which are already under offer and are due to complete next quarter including Unit 4 at Reliant Close, Chandlers Ford. We anticipate this will result in positive year-end figures and record take up levels for the South Coast.
The vital statistics have been summarised below:


  Q3 2018 (sq ft)  Q2 2018 (sq ft)  % change  % change Year on Year 
Total take up  501,071 241,655 107.35% -0.65%
Prime take up  113,815 18,778 506.11%  -50.10%
Secondary take up 387,256 222,877 73.75% 40.17%


South Coast Industrial Market Pulse Q3 2018 take up

Significant occupational transactions

Property Size  Landlord Tenant  Terms  Rent/Price (per sq ft) 
Unit 42 Oriana Way, Nursling 62,003 sq ft CBREGi Gregory Distribution 10 year lease £7.00
Unit 3 South Central, Southampton 48,080 sq ft La Salle John Lewis Partnership 15 year lease £9.00
Industrial unit at Parklands Business Park 27,600 sq ft   Higham Furniture  Freehold Sale   
Unit D2 Hamilton Business Park 24,760 sq ft Hargreaves DSV Air & Sea Limited 5 year lease £9.75
Unit 4 Mauretania Road, Nursling 16,447 sq ft  CBREGi  Union Mart Ltd  10 year lease  £7.50 
Unit 7 Merlin Park 12,270 sq ft BA Pension Fund Scott Cables 15 year lease Confidential

Availability marginally increases

Further grade A stock has entered the South Coast market this quarter, although this is at a slower rate than we have witnessed in the last 2 quarters. These included Plot 3B Dunsbury Park totalling 38,000 sq ft, Phase 2 at Daedalus Park comprising 14,141 sq ft and a three-unit development at Mortimers Industrial Estate of 6,305 sq ft.

Availability of secondary stock has marginally increased when compared to last quarter with large units such as 36 Brunel Way, 9 Test Valley Business Park now on the market, with the latter already under offer. However year on year this still represents a decrease of circa 200,000 sq ft.

The vital statistics have been summarised below:

  Q3 2018 (sq ft)  Q2 2018 (sq ft)  % change  % change Year on Year 
Total stock  2,676,274  2,616,679  2.28%  21.64
Prime stock  1,134,210  1,138,217  -0.35%  150.53
Secondary stock  1,542,064  1,478,462  4.3%  -11.75%


South Coast Industrial Market Pulse Q3 2018 availability

Investment Market Review

Approximately £55m of ‘South Coast Industrial’ assets traded during Q3 bringing total investment since the start of the year to circa £160m. UK Funds and Property Companies were the most active over the quarter. Prime yields remain under pressure and currently stand at 4.25%.

A number of Key transactions were concluded in Q3 which not only comprised Lineside Industrial Estate surpassing its quoting level of £19.17m (see Q2 Pulse for information) but included:

Hounsdown, Totton (rebranded to Optima 125): The property which comprised a vacant 125,000 sq ft refurbished distribution unit was sold to TH Real Estate for £18.85m.

Access Point: Unit 1 was sold on a 999 year lease and Unit 2 was let to Formaplex with a term certain of 8.36 years generating a current passing rent of £337,500. The freehold interest was acquired by BMO for £6,850,000 reflecting a NIY of 4.62%

Units 10-15 Petersfield Business Park: This Freehold multi-let trade counter estate with an AWULT to breaks of 7.30 years and generating a current passing rent of £203,592 was acquired for £3.80m reflecting a NIY of 4.99%. Quoting was £3.1m and 6.17% NIY.


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