South Coast: Industrial property market is buoyant despite political uncertainty

Near-record levels of enquiries and progress on several new developments contributed to a buoyant period for the industrial property market in the south, according to Lambert Smith Hampton (LSH).

Industrial property specialists based at LSH’s south coast office report that enquiry levels in the first quarter of 2017 were higher than the same period of the previous year, as demand for premises remains strong.

The firm’s South Coast Industrial Market Pulse report, which covers the first quarter of 2017, attributes this to interest in speculative new schemes including Alpha Park at Chandler's Ford; the South Central development at Nursling; the Solent Airport development at Daedalus, Lee-on-the-Solent; Pioneer Park in Portsmouth and the Dunsbury Park scheme in Havant.

LSH expects these developments to help accommodate the continued level of demand for prime space in the region, and anticipates that as the region’s larger companies move into bigger premises, secondary stock suitable for small and medium-sized enterprises will be released back into the market.

Overall, 432,837 sq ft of industrial space was taken up in the region in Q1 2017, a notable increase of 12.94% on the first quarter of 2016.

Adrian Whitfield, industrial & logistics director in LSH's Southampton office, said: “This is positive news for the South Coast industrial market and continues the busy year end in 2016 when over 1,800,000 sq ft was transacted despite the European referendum.

“What is yet to be seen is any impact on the market around the possibility of a widely-reported 'soft Brexit' following the result of the General Election.

“The confidence of increasing take-up, rental levels and occupier activity is focusing developers on providing much-needed supply to satisfy this demand, and further highlights the South Coast market’s buoyancy in uncertain political times. We can see scope for institutional investor demand for multi let industrial estates providing 5,000-20,000 sq ft units particularly in prime locations.”

LSH also reports:

• In comparison with Q1 2016, the South Coast witnessed a rise of 18.13% in the number of transactions.
• Availability within the South Coast industrial market was 2,142,164 sq ft at the end of Q1 2017, an increase of 4.85% from Q4 2016 (2,038,339 sq ft) and an escalation of 9.88% on Q1 2016 (1,930,464 sq ft).
• Take-up of industrial space has been consistent with the previous two quarters, with demand being driven by short supply of prime stock.
• There remains strong demand for freehold properties where the vast majority of stock being marketed is quickly placed under offer. LSH says that it is not uncommon for several parties to be contesting the same product – highlighting the lack of availability across the region.
• Rents continue to rise due to the decrease in secondary stock levels. Notably, rent levels per sq ft on refurbished units of 20,000 sq ft and above are exceeding those in the 5-10,000 sq ft bracket – a trend not seen in previous years.

Robin Dickens, industrial & logistics director at LSH’s Fareham office, added: “We envisage that enquiry levels will remain consistent whilst these new developments come on stream and will stimulate market churn to enable companies frustrated at the lack of available stock to expand and relocate.”