Industrial Market Review

East Midlands industrial & logistics market review

With no speculative development on the horizon, and continued occupier demand for prime industrial space, the distinct lack of supply continues to impact upon the East Midlands’ industrial and logistics market. Occupiers are moving towards build to suit with numerous opportunities on offer in the region.

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In this issue:

Build to suit opportunities fuel industrial take-up

  • Following completion of the Co-op’s 455,000 sq ft building at Castlewood (M1 J28), UDG will be taking a 250,000 sq ft building on the same estate. DPD are purchasing 330,000 sq ft at Hinckley Commercial Park (J1 M69/A5) and the remainder of the site is under offer.
  • The region’s key sites are all promoting build to suit accommodation within 6-12 months turnaround, including EMDC, Derby Commercial Park, Nottingham 26, Optimus Point, Castlewood, and Markham Vale; all of which provide easy access to the M1.

Power balance shifts to landlords

  • The past year has seen rents across most size sectors and locations stabilise, although significant rental growth remains to be seen. 
  • Higher rents are inevitably being achieved on better quality buildings; with proximity to the motorway network, good eaves height, large yard areas and loading facilities key influencers.
  • Incentives have significantly hardened; from 12 months’ rent free on a five year term to six months’ rent free, and increasingly favour landlords

Significant occupational transactions H1 2013

Property Size (sq ft) Landlord(s) Tenant Lease info
Hinckley Commercial Park  330,000  Goodman  DPD  Undisclosed 
The Duke, Burton-on-Trent 303,047 Westbrook Clipper Logistics £4.75 per sq ft
Castlewood, Huthwaite, Nottingham  255,000  Clowes Developments  UDG   Undisclosed  
Network 25, Sandiacre 164,000 Tesco William West £1.25 per sq ft

Distinct lack of grade A supply

  • Throughout the region there is an acute shortage of grade A supply across all size sectors.
  • There are few quality industrial buildings above 50,000 sq ft - the larger of which, Langley 255, has remained unoccupied for more than five years and is now clinging onto its grade A status. 
  • We have seen the most activity on multi-let estates up to 10,000 sq ft. Statistics will show plenty of availability, but the majority is lower quality stock. The level of good quality supply in this sector is now declining.

Government incentives will help drive demand

  • To encourage further speculative schemes, the Government is introducing an 18 month rates exemption for all newly built commercial property completed between 1 October 2013 and 30 September 2016.
  • Many occupiers have previously taken advantage of funding and grants available from the East Midlands Development Agency, which has now been closed.  Funding and incentives are now limited to those who qualify for Regional Growth Fund grants or Enterprise Zone status where savings to occupational costs can be made. Extended availability could improve demand.

What does the future have in store?

  • There is no immediate promise of real return to speculative development. We expect to see limited speculative development but generally on a small scale.
  • We will see a continued churn of existing second hand stock as occupiers are forced to compromise on quality, and some occupiers will be forced to look outside the region for wider choice due to limited grade A supply. 
  • The numerous build to suit options available will become a favoured solution, fuelling industrial take-up for the East Midlands.
  • Rents will increase; potentially doubling those seen in 2007/2008 when ‘softer deals’ were done to cover voids. 
  • Prices on existing stock will decline once speculative development increases, as stock currently considered grade A will become grade B.

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