Industrial Market Review
Luton and Dunstable industrial and logistics review H1 2015
With supply tightening across Luton and Dunstable, occupiers are being forced to widen their search areas to satisfy their requirements.
In this issue:
New occupiers come to Luton and Dunstable
- 2014 finished strongly with take-up in the final quarter of 273,000 sq ft compared to 44,700 sq ft from only two deals in the first quarter of 2015.
- The Q2 figures saw a significant boost with the 310,000 sq ft letting of DC1 at Prologis Dunstable to Amazon.
- A further 11 deals totalling 278,000 sq ft meant that take-up at the end of the first half of 2015 reached 633,000 sq ft. Six of these occupiers were new to Luton and Dunstable. At the same point last year, take-up had reached 384,000 sq ft across 19 transactions.
Lease terms continue to harden
- Lease terms continue to harden and rents are growing across Luton and Dunstable.
- In secondary locations, rents are rising for refurbished stock whilst incentives are continuing to reduce, with typical terms of three to four months rent free for a five year term.
- Due to a lack of supply, transactions under 30,000 sq ft continue to dominate whilst freehold transactions are becoming more common as capital values begin to approach their pre-recession highs.
Supply remains limited
- Available supply totals 700,000 sq ft, not including properties under offer. This is significantly below the long term average of 1.6 million sq ft.
- Of the 700,000 sq ft available, there is no new or grade A stock with refurbished grade B accounting for 11%. The remaining 625,000 sq ft is all unrefurbished grade C.
- The 102,000 sq ft unit D on Chiltern Park in Dunstable is the only building currently available in excess of 50,000 sq ft.
- It is anticipated that Prologis will announce a speculative build of DC2 (358,000 sq ft) at Prologis Park in Dunstable to address latent demand. With little land available, further speculative development will be limited.
Occupiers are looking further afield
- Whilst Luton and Dunstable have benefitted from occupiers further south widening their search areas due to limited supply in other markets, there is now evidence that Luton and Dunstable occupiers are being forced to look further afield, generally to locations further north, including Bedford, Milton Keynes and Northampton in their search for space.
- Supply will continue on a downward trend until speculative development is brought forward, which for mid box units or smaller is still two to three years away, given the lack of suitable sites. As a result, the shortage in supply is expected to fuel further rental and capital growth as occupiers compete for suitable properties.
- There is an acute need for speculative development in the next 12 to 24 months to address an anticipated spike of lease expires in 2017, otherwise businesses may be forced to relocate outside of the local area to satisfy their requirements.