While remaining resilient in a challenging current political climate, Reading industrial market for the first three quarters of 2019 was in limbo. It now needs to play catch up in the last quarter if it is going to perform equally to 2018, writes Neil Seager.
The current status does though look positive, with some 162,000 sq ft of space under offer, which if completed would bring the total take-up for the year above last year’s total of 325,015 sq ft. However, this would still put 2019 below the five-year average of approximately 512,000 sq ft.
Take-up last year of approximately 325,000 sq ft, based on a five or 10 year average was nothing to shout too loudly about. The fall from previous years was partly put down to the lack of supply in the market. The same applies this year but the political uncertainty surrounding BREXIT has had an even bigger impact on the decision making processes of tenants. As tenants look to buy time before having to make large business decisions they have tried – and succeeded in some cases – to secure short or flexible lease extensions.
At the time of writing a deal may be secured with the parliament and the EU. If we have left on October 31 then market sentiment suggests that those businesses that have been procrastinating will make positive decisions which will see a spike in demand.
However, conversely further delay is sure to keep the industrial property market locked in a political trance well into next year.
A spike in demand is not necessarily going to help in the short term. Supply of units in Reading remains at an historic low with just over 1 million sq ft in 79 units on the market now, compared to 116 units at the end of 2014. Fortunately almost half is now new stock but almost 300,000 sq ft of it is in two units. The means that of the 79 available units only 18% is new. Therefore, businesses are going to be scratching around for good quality space for at least another year.The issue is even more pronounced in the 15,000 to 100,000 sq ft bracket where there are only a small handful of units currently available.
We predict that businesses will continue to look further afield to find stock. This is not good for Reading, but also not likely to be that beneficial for other towns and cities as the supply dynamics are similar across the whole of the UK. This ultimately means that businesses in Reading and most parts of the UK will be held back in the short term.
Looking ahead there is some light at the end of the tunnel for Reading with a number of new schemes due to come on stream during the second half of 2020 and into 2021. But based on predicted five and-10 year averages there is still unlikely to be enough stock to meet demand.
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