Speculative investment and public sector support are behind Southampton’s success – now supply needs to meet demand.
Home to more than 7,000 businesses, Southampton’s economy is thriving thanks to an influx of private and public-sector development.
The Port remains a huge driver of growth, with much activity in the industrial and logistics sector linked to it. ABP’s continued investment, including its acquisition of Eling Wharf and a planned new £15 million automotive storage facility in the Port’s Eastern Dock, will strengthen the Port’s position and Southampton’s attractiveness to developers of speculative logistics schemes.
Automotive is a growth area, as the industry returns to the former Ford Transit site at Swaythling, led by high-end brands Aston Martin and Jaguar Land Rover which will move into the new dealership this Autumn. Hendy’s impressive £9m new facility for Kia, Mazda and Honda at Eastleigh is nearing completion, while Millbrook-based premium used car supermarket Imperial Cars has opened six new sites nationally, employing more than 340 staff and seeing sales rise in just two years from 1,000 cars a year to more than 1,200 a month.
It says much about Southampton’s resilience that, despite uncertainty over factors such as Brexit, economic confidence in the city remains high, as evidenced by demand for quality industrial space and an associated resurgence in speculative development.
One such success is Alpha Park, Chandler’s Ford, funded by BlackRock and constructed by Bericote Properties. It has attracted record rents, breaking the £10 per sq ft barrier for the first time for a property of this size in the region. The development has attracted quality tenants, including global supply chain group Charles Kendall and logistics provider DX Network Services.
Tom Clews, vice president at BlackRock Real Assets, noted: ‘Our strategy is to develop Grade A quality warehousing in prime, supply-constricted locations. We are pleased with the progress at Alpha Park, having achieved record rents within a very short time period, which is testament to our partnership with Bericote.”
Online retail, too, is driving growth in this area – significantly, John Lewis chose South Central, LaSalle Investment Management’s £30m speculative scheme at Nursling, for its new delivery hub. LSH’s Southampton team has let or under offer circa 750,000 sq ft of space to the end of July, a year-on-year increase for the period. Investors are clearly tending to choose quality over quantity as LSH’s latest UKIT investment transactions report notes that demand is keeping property prices high, with rental yields becoming lower as a consequence.
The office market is also driven by a lack of supply, with LSH’s most recent market Pulse report showing the amount of available space sinking below 1,000,000 sq ft for the first time. Enquiries from the technology, media, telecoms, finance and banking and insurance sectors are driving activity.
The White Building in the heart of the city has attracted high-calibre tenants and record rents of £22 per sq ft. In Winchester, where rents have hit £30 per sq ft, the supply shortage has reached a critical level, a problem that will be eased to some degree by Cavendish & Gloucester’s Chilcomb Park development, designed to accommodate up to 900 workers at companies which may otherwise have moved or set up outside the city.
Public-sector cash injections in Southampton are working alongside private-sector investment to create an attractive environment for businesses as part of the city’s Masterplan. Mike Harris, deputy chief executive, Southampton City Council, said: “Many of the VIP projects identified in the city’s Masterplan, which has successfully attracted £3 billion of investment to Southampton, are now part of Southampton’s new landscape and contributing to a vibrant and energetic city centre.
“We are in discussions with key property investors who are interested in the concepts we are developing for the Central Business District.
“The Nelson Gate opportunity builds on the Station Quarter public realm investment and occupies an important site adjacent to Central Station. We are working with developers FI Real Estate Management, who are undertaking an initial public consultation with regards to planning. FI Real Estate Management’s vision for a multi-million-pound scheme to redevelop the Nelson Gate area promises to provide much-needed office accommodation alongside hotel, residential and retail space. The scheme would build on significant public realm investment at Station Quarter and is one of seven ‘Very Important Projects’ forming the council’s City Centre Masterplan. To the south of the station, the proposed Central Business District would incorporate substantial office, retail and leisure development as well as housing.”
Like any Masterplan, success will depend on investment, collaboration and vision – but with a positive approach and support for developers who want help to meet the clamour for quality space, the challenge can be met.
Lambert Smith Hampton, which has offices in Fareham and Southampton, is a multi-award-winning commercial property specialist and has the largest transactional team in the Solent region, with 13 specialists working in the industrial property, office space, retail, leisure and investment markets.
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