Market snapshot

Review of 2012

Despite what started as a slow year for the region’s industrial and logistics market, a more encouraging level of occupier activity in the final two quarters helped redress the balance in overall take-up to 1,960,000 sq ft.

As we predicted at the start of 2012, the South Coast has struggled with the lack of large, quality industrial/
warehouse units above 20,000 sq ft. This has been, and will continue to be, both a challenge for the market and a conduit for ‘design & build’ pre-let transactions.

Number of pre-lets signed

Due to the lack of quality supply, industrial occupiers could struggle to identify suitable premises and may opt to relocate outside of the region. However, we are increasingly seeing tenants enter pre-let agreements for bespoke facilities to secure the required space. A number of significant pre-let deals signed in 2012,
including international courier and logistics giant DPD (Dynamic Parcel Distribution) – a GeoPost brand – signing for 36,580 sq ft at Hargreaves’ Hamilton Business Park, Hedge End. The bespoke scheme was completed within nine months.

Canmoor Developments and Diageo Pension Fund have agreed two further pre-lets at Endeavour Park on
Millbrook Road, Southampton, since acquiring the site less than a year ago. The two deals, signed in December with UPS and Selex Galleo, are welcome news in the wake of the Ford closure in Swaythling.

Lidl has also agreed to purchase 28 acres, subject to planning, to the south of Adnac Park in Nursling from
the Barker Mill Trust. It intends to construct a 420,000 sq ft unit, which will be the largest distribution unit along the M27 corridor.

Rents maintained incentives cut back

Along the M27 corridor, we have seen a steady flow of take-up in smaller industrial units. Rents have been maintained at a consistent level but, as with medium to larger units, we could see a slight rental increase on modern units where there is a lack of supply, as well as shorter rent free periods. In certain deals, rent free periods have been shortened due to the lack of stock. Due to banks’ ongoing lending restrictions, occupiers are still struggling to acquire their own premises. This has resulted in a reduction in capital values, particularly where sellers are under pressure to dispose of a freehold interest.

City focus Southampton and Portsmouth

Southampton City Council has been under pressure for many years to release 16 acres of prime development land at Test Lane South, and has now started marketing and inviting bids in early 2013. We anticipate that the site will generate interest from national developers and institutions, and could even be a candidate for speculative development.

Portsmouth has seen a steady flow of activity in 2012. The major change has been SEGRO selling the majority of its South Coast assets to Threadneedle, namely the Railway Triangle, Mitchell Way and Voyager Park estates. Portsmouth’s economy has typically been resilient to major job losses, but this resilience will be put to the test if BAE Systems closes down its shipbuilding in the dockyard. However, the development of the new aircraft carrier support facility in 2015 is positive news for the City.

Predictions 2013

We foresee 2013 mirroring 2012 in many respects; the main challenge being the decreasing supply of larger, quality units above 20,000 sq ft. Again, the emphasis will be on pre-let opportunities which are deliverable within a realistic timescale.

As with the rest of the UK, there are a significant number of enquiries from parcel delivery firms linked to home delivery from internet sales. These occupiers are likely to be the most active, with their interest already logged against a number of opportunities along the M27 corridor.

Schemes to watch in 2013

F&C REIT Asset Management has commenced marketing at Strategic Park, Hedge End, where a modern detached unit of 68,000 sq ft has already attracted interest. Aviva Investors will also commence marketing of 30,000 sq ft at Kites Croft, Segensworth, which will be available from September this year. These schemes, along with SEGRO and Roxhill’s Voyager Park South and Merlin Park in Portsmouth, which was acquired by Canmoor Developments and BA Pension Fund in December, will be the ones to watch in 2013.

We anticipate that the two tier market will grow further apart. We foresee prime stock continuing to be in strong demand with net rents even moving forward, whereas the secondary and tertiary estates will continue to see competitive rents and incentivised deals being the norm.

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Robin Dickens | Director - Industrial | Fareham
Robin Dickens

01489 579579

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Robin Dickens
Director - Industrial

01489 579579

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