Industrial Market Review

South Coast Industrial Pulse Q3 2016

In the aftermath of the recent decision by the UK to leave the European Union, the South Coast industrial and logistics market has experienced a temporary hiccup in terms of transactions. Enquiry levels remain high, the investment market is still performing and the fundamental indicators of supply versus demand suggest a return to more normal transactional activity by the end of year.

Adrian Whitfield, Lambert Smith Hampton’s industrial and logistics director, comments “There was a noticeable pause in the industrial market in the three months prior to the Referendum and following its surprise result, which coincided with the traditional summer slowdown.

“However, no occupational transactions were shelved as a result of the Referendum vote and the key market drivers of a shortage of good quality stock, coupled with occupier enquiries remaining strong (particularly for units of over 10,000 sq ft) will not radically change.”

In this issue:

Enquiry levels remain strong despite uncertainty

• Despite the pause in the transactional activity following the Referendum result, total enquiry levels remain strong at 112, a decrease of only four on the previous quarter and an increase over 2015 of eight for the year to date.

• Enquiry levels increased for units over 10,000 sq ft – at 48, this was up 37% compared with Q2 2016, however, there was a decrease in enquiry levels for units under 5,000 sq ft of 21%, with enquiries down to 64 during the quarter.  

It was noticeable that after the traditional summer slowdown, there was a positive surge in enquiries and viewings, particularly from internet retailers. There appears to be no change with regard to occupiers’ acquisition requirements and generally they are committed to continuing with the same gusto as before the Brexit decision.

Take-up restricted by Referendum pause and ongoing lack of quality supply

• The total take-up in Q3 2016 was 375,929 sq ft, significantly down on the Q2 2016 high of 680,316 sq ft and the Q3 2015 total of 600,831 sq ft.

• Take-up for the year to date is 1,450,000 sq ft and is therefore expected to end the year on a par with 2015.

• More noticeable is that the top five deals in Q3 2016 totalled 180,000 sq ft, compared with the top five in the same quarter of the previous year amounting to 320,000 sq ft.

The dip in take-up in Q3 2016 has been caused in part by a pause due to market uncertainty surrounding the EU Referendum, however, it should be noted that both Q2 2016 and Q3 2015 experienced unusually high levels of take-up, dominated by large transactions and therefore, the comparison with these quarters is not like-for-like.

In a longer term trend, take-up is being restricted by the ongoing shortage of good quality available space along the M27 corridor, particularly for units of over 30,000 sq ft.

Supply remains low but stable

• There was a minimal decrease in availability from Q2 2016 from 2,124,487 sq ft down to 2,065,739 sq ft

• Of this, 362,324 sq ft is prime space – a significant increase to 17.5% of the total compared with 13.34% (224,647 sq ft) in Q3 2015.

This availability represents just over 12 months’ supply based on 2015’s take-up of 1.9m sq ft. The increase in availability of prime space is due to the completion of two new high spec units at Kites Croft, Segensworth. One of these has been let since the end of Q3 and there is considerable interest in the other.

Significant occupational transactions

Unit 9 Barton Park Industrial Estate, Eastleigh 

90,000 sq ft

JPI Warehousing

Tower Lane, Eastleigh

52,613 sq ft

H Young (Properties) Ltd 

Biffa Waste Services Ltd
£5.70 per sq ft
Unit H Glenmore Business Park, Chichester

22,562 sq ft
Glenmore Commercial Estates Ltd
Flip Out UK
£10.59 per sq ft
Unit 3 Kites Croft, Fareham 

9,536 sq ft 



£9.00 per sq ft
Unit B4 Millbrook Close, Chandlers Ford, Eastleigh

6,125 sq ft
Store Properties Ltd

ESS Hire 

£9.00 per sq ft

Development round-up

Bericote Properties is expected to commence development of three units of 20,000 sq ft, 45,000 sq ft and 84,000 sq ft at Alpha Park in Chandlers Ford, with a completion date of Q4 2017.

Mountpark Logistics has now secured planning for the development of 18.7 acres in Eastleigh to provide industrial and logistics space totalling circa 366,000 sq ft, with the smaller site of 6.67 acres already under offer to a single owner occupier. Units, ranging in size from 40,000 sq ft upwards, are expected to be built speculatively.

Peel Logistics’ South Central development, close to Southampton Docks, comprising three units of 40,000 sq ft, 50,000 sq ft and 117,000 sq ft should all go some way towards alleviating the acute shortage of stock available on the South Coast.

At the Solent Enterprise Zone near Lee on Solent, there has been a hive of activity promoted by Fareham Borough Council, with the speculative 25,000 sq ft unit under offer to an aviation company and full occupancy of the Innovation Centre, with more positive development plans in the pipeline.

Further east along the M27 corridor, the new 80,000 sq ft distribution warehouse for FatFace is nearing practical completion, which signals the opening of the new 45 acre Dunsbury Business Park, which can accommodate new B1/B2/B8 units from 20,000 to 200,000 sq ft.

Merlin Park in Portsmouth is a prime industrial and logistics site being developed by Canmoor, which has obtained planning permission to build up to 150,000 sq ft in a range of unit sizes.

Similarly, at the Trident and Velocity development sites in Havant, plans are underway to build new units from 30,000 sq ft upwards.

The key opportunity for developers to achieve favourable rents is in the development of multi-let industrial estates on the M27 corridor.

Rental values hold firm

There has been no evidence of rental values (prime or secondary categories) being adversely affected by any market uncertainties. Whilst in some cases, tenants may have attempted to renegotiate terms, landlords have stood firm due to the lack of alternative available space in the region. 

Evidence of this is the recent letting of 52,000 sq ft at Tower Lane, Eastleigh, a deal which was in solicitors’ hands for over 12 months throughout a lengthy planning and environmental approval process, where no renegotiation on the terms occurred. Similarly, the acquisition of a new warehouse of 25,634 sq ft at Pioneer Park in Portsmouth by a national trade warehouse company occurred at a headline rent of £8.50 per sq ft in Q3 2016.

Investment market review

Throughout 2016 and particularly during Q3, there has been a notable lack of available investment opportunities along the South Coast. The majority of the few transactions that have occurred during the quarter were conducted off-market, through unsolicited approaches.

July and August was a period of adjustment post the EU Referendum and activity began to pick up in September, with a number of sales being prepared for launch. However, many investors are reluctant to sell, given the general positive occupational market conditions.

Key investment deals

Interchange Park, Portsmouth, a long leasehold multi-let estate totalling 175,152 sq ft, was quietly brought forward via a targeted campaign and was sold to a property company for a figure in the region of £10m, representing a net initial yield of circa 8.00%. Details remain confidential.

School Lane and Trafalgar Close, Chandlers Ford, a multi-let estate totalling 36,534 sq ft, was acquired off-market by Store Property Investments from a UK institution for £3.3m, representing a net initial yield of 7.00%.

Unity House, Basingstoke, a freehold sale and leaseback to GAME Retail Ltd, was acquired for £13.5m (7.35% net initial yield). by Portsmouth Estates. The quoting value was £14m.

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Southampton, Adrian Whitfield, industrial agency
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023 8071 3073

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Director - Industrial

023 8071 3073

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