The industrial property market on the South Coast has been ‘rejuvenated’ by an influx of high-quality premises that are further strengthening the region’s appeal for national and international businesses, reports Lambert Smith Hampton (LSH).
The firm’s South Coast Industrial Market Pulse report for Q2 shows that a series of prime developments along the M27 Corridor are continuing to fill the market and attract significant interest from occupiers. The majority of enquiries are for quality logistics warehouse space, while LSH also reports an increase in enquiries from the manufacturing sector.
The report cites a number of new Grade A developments coming to market, including 340,000 sq ft of space at Phase 2 Mountpark, Southampton, 101,726ft at Velocity, Havant, and 91,000 sq ft at Merlin Park, Portsmouth – all complementing major multi-million-pound schemes at Alpha Park, Chandler’s Ford, and South Central, Nursling.
The second quarter of 2018 saw transactional investment volume for LSH’s South Coast industrial team hitting approximately £100 million. The headline transactions included LaSalle (Greater Manchester Pension Fund) acquiring South Central, Nursling, and M&G Real Estate purchasing Phase 1 Mountpark Southampton as part of a larger portfolio sale.
Significant occupational tenant transactions included Charles Kendall Freight taking up 44,878 sq ft at Alpha Park, Formaplex taking up 25,812 sq ft at Hazleton Interchange in Waterlooville, Anglian Windows Limited taking up 16,714 sq ft at the IO Centre Segensworth, and Phoenix Helicopter Academy taking up 6,394 sq ft at Solent Airport.
The report sounds a warning note, however, around the availability of secondary stock, which has dropped to its lowest level since the third quarter of 2015. There is also now a real shortage of prime stock for smaller units, presenting a gap in the market for developers to satisfy. One success story bucking this trend is Glenmore Business Park, in Chichester, where 75 small business units have been built.
Commenting on the report, Adrian Whitfield, director, industrial and logistics at the South Coast offices of LSH, said: “The long-awaited influx of prime stock is continuing to fill the market and providing occupiers with the grade A stock they have been craving for. Finally being able to see the finished product, occupiers are committing to these schemes as they approach completion.
“With Grade A stock continuing to rise out of the ground, the result has been a rejuvenation of industrial stock on the South Coast, reinforcing the region’s appeal for national and international occupiers, as well as local ones.
“It all adds up to a positive outlook for the South Coast as a place to invest as the regional economy remains buoyant amid the ongoing Brexit negotiations.”
LSH also reports:
- Total take-up of 230,730 in Q2. This represented a marginal decline, but this can largely be attributed to a high number of large transactions that are currently under offer (totalling approximately 550,000 sq ft).
- Overall availability of industrial stock is on the rise, increasing by around 17% year-on-year to 2,616,679 sq ft.
- Enquiries remain strong and in line with the three-year average.
- LSH continues to see increased enquiries for larger stock, however, there is particular focus for space of under 20,000 sq ft, representing 78% of all enquiries received.
- The letting at Alpha Park has finally pushed industrial rents on new build 30,000 sq ft plus into double digits on the South Coast, with the Southampton area now reaching £10 per sq ft.
- Prime stock filling the market may result in a trend towards landlords refurbishing poorer grade stock to compete with the new grade A space.
For the full South Coast Industrial Market Pulse Q2 2018 report, see www.lsh.co.uk