The pace of growth in the industrial market is outstripping not just the supply of new development but also land on which to build it. By Cheryl Freedman.
First the good news. Eager occupiers are soaking up Hampshire’s industrial stock. And the bad? Pretty soon there won’t be much of it left.
Local agents such as Young & Butt call the situation “alarming”. Michael Green of King Sturge is also concerned: “Almost all the secondhand space in Southampton and surrounding towns has been absorbed and, until the current development cycle actually puts buildings on the ground, there is a shortage of new space in prime locations.”
According to David Heda of Palmer Fry, there is a dearth of stock particularly in the 743-1,394m2 (8,000-15,000 sq ft) market.
Martin Tice of Vail Williams believes that the phenomena is not restricted to one area. “Along the whole of the M27 and M3 corridor there is a shortage of good-quality industrial stock,” he says.
But, despite rocketing demand, developers have been slow off the mark to develop speculatively.
Roger Holt of Neilson Holt puts it down to a simple matter of supply. “The market has required more speculative development, but there just isn’t the land for it,” he says.
Green believes that the development market has been surprisingly slow to recognise the imbalance. This, he says, “reflects the air of caution that can still be felt in the market”.
While the market is still too weak to encourage prelets, Green says that those building speculatively will not regret their decision. But it is not easy.
“There are increasing sources of speculative development funding, but you have to look for them,” says Green.
“Many a developer seeking speculative funding in recent months has come back from the city empty handed. The funds are fussy and are looking for quality locations and developers with a track record of performance.”
Those that have taken the plunge have reaped the rewards. Developers hbg Properties and Norwich Union are about to complete five industrial units totalling 11,798m2 (127,000 sq ft) at Segensworth’s Sopwith Park. Now interest is focused on a deal by contact lens manufacturer Aspect Vision, which has prelet two units of 2,323m2 and 2,694m2 (25,000 sq ft and 29,000 sq ft) – Hampshire’s biggest industrial letting in recent history.
Tice believes that the deal is a positive sign: “There is strong interest in the next two units. This is similar to the late 1980s in preletting terms.”
Green says that an achieved rent of £65 per m2 (£6 per sq ft) at Sopwith is becoming the market norm. “Those schemes coming on stream this year are finding market conditions very good indeed,” he says. “Headline industrial rents are now £65 per m2 (£6 per sq ft) for prime space and will soon be £67-£70 per m2 (£6.25-£6.50) if current trends continue.”
Meanwhile, according to Roger Holt of Neilson Holt, the only speculative development in Southampton is City Estates’s Chandler’s Park at Chandler’s Ford. Two units of 2,044m2 and 3,902m2 (22,000 sq ft and 42,000 sq ft) will be completed in May. Rent is quoted at £70 per m2 (£6.50 per sq ft). Holt reports strong interest already.
Elsewhere, three units have been sold at the 2,845m2 (30,623 sq ft) Mitchell Point at Ensign Point, Hamble, Southampton, where there are around 20 small units. Palmer Fry is the agent.
Some speculative development is taking shape at Nursling Industrial Estate, a park on junction 3 of the M27. Taylor Woodrow Property Group is developing 2,350m2 (25,300 sq ft), starting work after Easter. Agent Palmer Fry is quoting rents of £70 per m2 (£6.50 per sq ft.)
At Eastleigh, City Estates’ Chestnut Park site has experienced planning problems with multiplex plans. City Estates is now likely to opt for an industrial development on the 2.8ha (6.8 acre) site. Neilson Holt will be seeking prelets at £70 per m2 (£6.50 per sq ft) on the site.
At Test Valley Business Park, North Baddesley in Southampton, Drapers Tools has taken 8.1ha (20 acres) where it intends to build a 100,000m2 (1.08m sq ft) facility. King Sturge & Co acted for Shaftesbury Commercial Properties while Neilson Holt represented Drapers.
Alex Medhurst of Vail Williams believes that this forms part of a trend. He says: “A lot of occupiers are looking for their own sites as well.”
He adds: “The secondhand market has hardened, showing growth in the past 12 months. Good-quality secondhand space is £54 per m2 (£5 per sq ft).”
Post-merger, P&O and Stenna are releasing units of 1,858m2 and 2,787m2 (20,000 sq ft and 30,000 sq ft) at Nursling Industrial Estate off the M27 and M271’s junction. Agents King Sturge and Neilson Holt will be quoting £54 per m2 (£5 per sq ft).
Meanwhile, at Fareham Reach, Fareham, J Saville Gordon is redeveloping 32,515m2 (350,000 sq ft). Sole agent is Austin Adams.
A shortage of greenfield land allocations is causing further problems. Says Matthew Small of Young & Butt: “This is creating a focus on brownfield sites within the city boundaries of Southampton and Portsmouth, where existing 1960s units are becoming obsolete.”
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TRANSACTIONS
Sopwith Park, Segensworth: Aspect Vision has taken 2,323m2 and 2,694m2 (25,000 sq ft and 29,000 sq ft) at £64.60 per m2 (£6 per sq ft) on a 20-year lease with a break at year 15. Vail Williams and King Sturge acted for hbg Properties and Norwich Union. Warwick Martel represented Aspect. Walton Road, Southlink: Porchester Microtools has taken 2,508m2 (27,000 sq ft) at £60 per m2 (£5.55 per sq ft) on a 25-year lease. Vail Williams acted for Clerical Medical and English & Overseas. Nursling Industrial Estate: B&Q has taken 3,159m2 (34,000 sq ft) on a four-year lease at £138,700 pa. Humberts acted for Aalco. Young & Butt represented B&Q. Portfield Road: GB Express has taken 934m2 (10,050 sq ft) on a 10-year lease at £54 per m2 (£5 per sq ft). Conin & Co acted for GB. Vail Williams represented the landlord, BG. 3 Pipers Wood, Waterlooville: Talking Plastics has taken 587m2 (6,320 sq ft) on a 15-year lease with a five-year break at £54 per m2 (£5 per sq ft). Vail Williams acted for Threadneedle. Fareham Industrial Park: Procell Direct has taken 497m2 (5,346 sq ft) on a 10-year lease with a five-year break at £54 per m2 (£ 5 per sq ft). Vail Williams acted for Standard Life. Eagle Close, Chandler’s Ford Industrial Estate, Eastleigh: OK Industries has taken 1,579m2 (17,000 sq ft) of warehousing on a 20-year lease at £67 per m2 (£6.25 per sq ft). Palmer Fry represented OK Industries. |
