Industrial Market Review

South Coast Industrial Market Pulse Q4 2017

The last quarter of 2017 remained consistent with the end of 2016, with strong demand from occupiers taking up prime stock from the market and continuing to push up rents.

With an increase in availability, due to completion of various speculative developments, we see 2018 being a key year for occupiers to take advantage of the new stock available in the market.

In this issue:

Enquiries remain consistent

Enquiries remained consistently high for 2017, reinforced by Q4 being on par with the previous quarter. Year-on-year, enquires were up 15% when compared with Q4 2016.

Q4 2017 has shown enquiries in the 10,000 – 20,000 sq ft category overtake the smaller category of 5,000 – 10,000 sq ft by 20%. This is the first time we have seen this for over 5 years, showing a clear shift in occupiers requirements, we believe this is mainly due to the lack of  stock in the sub 10,000 sq ft sector and occupiers confidence in their expansion plan for future growth.

Prime take-up remains strong

Annually take-up has reduced from 1,888,705 sq ft in 2016 to 1,750,576 sq ft (-7.31%) in 2017. Prime take-up in 2017 has increased from 2016 to 551,981 sq ft (65%). 2017 secondary take-up decreased from 2016 to 1,198,586 sq ft (-22%).

As shown in the graph below, total take-up in Q4 amounted to 394,005 sq ft, reflecting a decrease of 110,354 sq ft (-21%) from Q3. However, the uptake in Q3 can be accounted for by two significant transactions at Mountpark, Southampton totaling 160,660 sq ft.
In comparison with Q4 2016, there has been a minor decrease in total take-up of 45,485 sq ft (-10%).

Prime take-up has decreased by 84,560 sq ft from Q3, to 143,514 sq ft (-158%). Although, this again, is attributed to the significant transactions at Mountpark, Southampton in Q3. In contrast, however, prime take-up for the quarter was at 143,514 sq ft, 114,726 sq ft (498%) above that of Q4 2016, underlining the lack of supply in previous years. We expect to see this trend continue well into 2018.

The graph below clearly shows prime take-up steadily increasing over the past 5 years, which aligns with the clear availability of new speculative developments along the South Coast.

When comparing secondary take-up in Q4 2017 to Q4 2016, it has fallen slightly by 160,211 sq ft (-39%), with a 25,794 sq ft (-9%) reduction on Q3 2017. In our opinion, this is due to an increase in prime take-up and tenants renewing their leases on existing premises.

Significant occupational transactions







Unit 3 South Central Southampton

46,080 sq ft

Peel Logistics funded by Rockspring  

John Lewis  


Quoting £9.50

Unit 3 Trilogy, Segensworth

42,760 sq ft

Standard Life Investments

Ceva Logisitcs



Unit 2 Kenwood Business Park, Havant

16,576 sq ft

M7 Real Estate

Colt International



Unit BPortfield Industrial Estate, Portsmouth

16,231 sq ft

Hargreaves Properties

Accuracy International



Availability increases with new prime stock

As a direct result of new speculative developments coming out of the ground, availability for the year increased, when compared with the four-year average. Total stock in the region at the end of Q4 2017 was 2,293,412 sq ft, denoting a small increase of 93,328 sq ft (4%) on the previous quarter, or an increase of 225,073 sq ft (12%) against Q4 2016.

Supply of prime stock increased during Q4 2017 to 709,904 sq ft, an uplift of 257,177 sq ft (56%) on the previous quarter and 300,290 sq ft (73%) against Q4 2016. In contrast, supply of secondary stock decreased in Q4, by 163,849 sq ft (9%) on the previous quarter and 45,217 sq ft (2%) against Q4 2016.

In 2018, we expect to see the supply of prime stock continue to increase as the current pipeline of development schemes such as Merlin Park, Portsmouth (91,030 sq ft), come out of the ground. As for secondary stock, we expect to continue to see a gradual decline in availability as tenants remain in their current premises.

Double Digit Rents?

As we have seen over 2017, rental levels are continuing to increase and get ever-closer to the double-digit number. We are continuing to see the gap between prime and secondary stock marginalised due to the lack of secondary stock available, as illustrated in the adjacent table.

Freehold properties remain in hot demand and we anticipate that capital values will continue to increase across all size ranges and locations in 2018, as owner-occupiers, in particular, search for their own properties, rather than paying increasing rents.

In 2018 we also expect to see a continued rental growth especially in secondary stock across the region.

New development round-up

Canmoor’s speculative development of Merlin Park in Portsmouth is out of the ground and will provide 91,030 sq ft of prime industrial and logistics space across seven units. Construction of the scheme is due to complete in mid-2018.

Fareham Borough Council has constructed six new business hangars on its scheme at Solent Airport, Daedalus, Lee-on-the-Solent. Three of the five club hangers are under offer.

Construction of Bericote Properties’ speculative scheme, Alpha Park at Chandlers Ford, funded by Blackrock, has completed. Unit 1 has been successfully pre-let to DX Network Services and there is significant interest in the remaining two units of 45,000 and 84,000 sq ft, respectively.

At Peel Logistics’ new development, South Central in Nursling, financed by Rockspring, John Lewis has taken a pre-let of Unit 3, with two units of 39,000 sq ft and 117,000 sq ft remaining. Completion is due for May 2018.

Following the success of Phase 1, at Mountpark Logistics’ new scheme on the former Ford site at Wide Lane, Eastleigh, Mountpark has acquired 9.7 acres on the adjacent site. Phase 2 will comprise four units, ranging from 67,500 to 106,930 sq ft, and is due to complete in October 2018.

The last remaining site at the highly successful Hamilton Business Park in Hedge End, Southampton, has been speculatively developed by Hargreaves Properties, resulting in a detached 24,760 sq ft high spec industrial/warehouse unit, available to rent.

Salmon Developments has purchased the final plot at Harts Farm Way, Havant and will speculatively build four units, available freehold or leasehold.

Investment market review

Approximately £61m of the South Coast’s industrial assets were traded in the fourth quarter of the year. This brings the total investment for 2017 to circa. £177m. UK Funds and property companies were the most active during the year and, despite being competitive when opportunities arose, Local Authorities (directly) were only involved and successful on a handful of deals, including Eastleigh Borough Councils £18.1m purchase of Aim Aviation in Bournemouth.

Key transactions in Q4 include:

Stoke Park Eastleigh: The property, totalling circa 84,000 sq ft, was let to DHL and Freightroute with a term certain of 5.57 years, at a passing rent of £592,580 (£7.27 per sq ft). Unsurprisingly, competition was robust with Oxenwood Real Estate eventually securing the asset for £10.1m (5.5% NIY), which was notably above the quoting level of £8.55m (6.50% NIY).

Fareham Business Park: his prime multi-let industrial/trade estate was acquired off-market by Aberdeen Standard for £20.2m (4.76% NIY). The property, measuring c.133,000 sq ft on a site of 11.2 acres, was let to tenants including Forumula One Autocentre, EnCon Insulation and a Drive Thru KFC. The AWULT was c.8 years.

Eastleigh Works: Savills Investment Management successfully acquired the 48-acre estate from St Modwen for £20.6m. The property was 75% let to Arlington Fleet Services with c.18 years term certain, at a passing rent of c.£1.8m.

The industrial sector along the South Coast continues to be ‘hot property’, with consistent levels of competition seen for all product types. Prime yields now stand at approximately 4.5%. With opportunities in the region being far and few between and investors attracted to the strong occupational market dynamics, the outlook over the coming year continues to look positive.

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Southampton, Adrian Whitfield, industrial agency
Adrian Whitfield

023 8071 3073

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Adrian Whitfield
Director - Industrial

023 8071 3073

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