Industrial Market Review

M3, M4, M40 industrial & logistics market review

Over the last 12 months, take-up of Grade A supply across the M3, M4 and M40 corridors totalled 513,000 sq ft. This leaves just 12 months supply of Grade A stock.

Within these markets, there is over 5.5 million sq ft of industrial and distribution land with planning permission that is yet to be built, which begs the question; who is going to ‘buck’ the trend?

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In this issue:

M3 corridor

The availability of Grade A stock stands at 80,552 sq ft, over six units. Supply of Grade A stock is close to zero in the Blackwater Valley, although there are a number of sites with planning consent – particularly at Farnborough, where Hartland Park, Home Park and Voyager are all being promoted for design and build or possibly land sales. The lack of development in recent years will inevitably limit take-up as occupiers are forced to look at alternative locations.

Looking slightly further south at the Woking and Guildford markets, the lack of supply is even more acute. Supply of all stock in Woking stands at 3.5 months and with virtually nothing in the way of new sites coming on stream, the market will eventually stagnate, although rents are bound to harden for the best quality second hand stock.

M4 corridor

Locations along the M4 corridor are the best supplied with 19 months of Grade A supply. However, Maidenhead has no Grade A supply, no sites with planning permission and only 56,230 sq ft of secondary stock available over four buildings. Reading has no Grade A units between 30,000 and 50,000 sq ft.

M40 corridor

The M40 corridor has the highest number of industrial and distribution sites with planning permission, with potential for 2,500,000 sq ft of design and build opportunities.

However, there are only three available Grade A buildings along the M40 corridor totalling 40,225 sq ft, which equates to only two months supply. This lack of supply could lead to low take up levels, as occupiers might lose confidence or opportunity to move, as there will be limited available Grade A stock.

M4 leads the way for take-up

The M4 corridor has seen 37 transactions totalling 882,000 sq ft. The M40 corridor saw 791,000 sq ft of take-up over 27 transactions and the M3 only saw 437,000 sq ft of take-up including the Woking/Guildford area.

The M4 and M40 corridors are prime distribution locations, linking London to the North and West. There is also a healthy number of requirements for industrial units over 10,000 sq ft in these areas. With occupier confidence increasing in some sectors, landlords and developers should be looking to capitalise by building in certain undersupplied size brackets, in drastically undersupplied locations.

The M3 corridor experienced lower take-up levels, largely down to low levels of Grade A supply. With the underlying economy set to improve it’s likely that conditions will be right for the return of speculative development and refurbishment of existing stock, which in turn, will stimulate take-up.

Prime rents across M3, M4 and M40


Industrial investment sustained in the region

The Thames Valley remains popular with investors and we have seen sustained levels of activity throughout the region during 2013. Due to the availability of stock, a greater proportion of the transactions recorded have centred on multi-let industrial estates rather than single-let logistics and distribution units, and while demand for modern well-let distribution assets continues to grow across the UK, we consider the focus within the Thames Valley will remain on the multi-let sector.

During 2013, the Thames Valley has witnessed industrial investment transactions totalling approximately £76.9M, the majority of which has centred on the established M3, M4 and M40 locations with strong industrial occupier bases. This excludes Oaktree’s acquisition of IQ Winnersh for a reported £245 million, reflecting 7.6% NIY, one of the largest investment transactions of 2013, and the only single-asset transaction over £100 million.  The site includes approximately 630,000 sq ft of industrial accommodation.

Wokingham has seen a particularly high level of activity during 2013 with four significant industrial assets traded so far this year, totalling approximately £21.8 million. The sale of Units 14-26 at The Business Centre – forming part of the SEAL Portfolio – in February was followed by those of Optimum, Ashville Park and Wokingham Commercial Centre, demonstrating increased demand for well-specified industrial assets within the town. Bracknell has also seen resurgence in demand, with Kier’s Trade City scheme on East Hampstead Road being funded by Aberdeen Asset Management for 6.53% NIY.

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Philip Hunter

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