As we embark on an eagerly awaited New Year, Alex Wilkinson from our Industrial Agency Team looks back on 2014 and provides predictions for what 2015 has in store for us.
During 2014 our expanding Yorkshire agency team saw a growing momentum of positivity within the industrial sector. This positivity has highlighted a real lack of supply of good quality sheds and this growing demand from occupiers has resulted in the take up of existing supply, making it clear that as we enter 2015 there is a need for significant speculative development
Throughout last year we saw prime rents reaching £6.50 per square foot at schemes including Wakefield Road Trade Park in Bradford, which when compounded with the depleting availability of both Grade A and secondary stock demonstrates that the industrial sector is experiencing strong occupier demand. Developers are not slow to recognise this growing trend and are now reviewing existing sites, with a prime example of this being Keyland Developments plans to develop the former North Bierley water treatment works (57 acres) into 500,000 sq ft of industrial and distribution space. This growing focus on the development of existing sites has been coupled with the refurbishing of secondary stock, a notable scheme has been the refurbishment of Mildred Sylvester Way, Normanton, Wakefield, offering 36,000 sq ft back to the market.
This growing appetite has led to industrial take up in the UK increasing by 50% on last year at 28.5m sq ft. Of the take up 60% has been across secondary stock.
The strong showing during 2014 makes it clear that the market is no longer an ‘occupier’s playground’, instead we have witnessed landlords beginning to respond to the economic recovery by seeking more favourable terms from ingoing tenants. This response is translating into deals which are seeing declining break option frequency coupled with tighter rent free periods and it is with interest that our clients are now finding themselves with a tenant selection process.
Throughout 2014 our industrial agency team has been assiduous with a vast variety of industrial instructions which has seen a growing emphasis on acquisition work on behalf of clients including property companies, investors, leasehold tenants and owner occupiers. As we enter a new year, this work is continuing.
Whilst our acquisition work has become more prominent, we have also seen an increase of instructions on larger sheds of over 100,000 sq ft. One prime example of this is that of Birstall 140, a 140,000 sq ft shed situated just off junction 27 of the M62 motorway. The unit is positioned on a 6 acre site with the benefit of 7.3 metre eaves and having a power availability of 1000 KVA. We offered this to the market at a guide price in excess of £3.25 million which generated strong interest from owner occupiers and investors alike.
Investment is becoming an ever increasing talking point in the market with yields tightening due to the decisive appetite from investors both from the UK and overseas. We are seeing more emphasis being placed on the regions and in particularly Yorkshire, with many London Funds vigorously looking to purchase here.
We have seen this shift first hand with the investment sale of the 78,285 sq ft Caldene Business Park, Mytholmroyd, West Yorkshire, which is situated on the A646 Yorkshire to Lancashire trunk road. The investment of 23 modern light industrial and warehouse units, with tenants such as SGL Carbon Fibres, Nobilia GB and Stockers, had a passing rent of circa £474,000 and had a £4.75 million price tag. A further investment sale our agency team has seen over the line in 2014 is the sale of Wharfedale Business Park, Bradford. A multi let predominantly industrial investment on a site of 6.3 acres, with an ERV of in excess of £170,000 per annum. Offers were invited in the region of £1.295 million.
Interest in the site has been strong, showing that overall investor demand remains keen, and it is clear that multi-let industrial estates with a potential for income improvement are seeing an increase in competitive bidding.
In light of the improving and enlightened industrial occupier and investor markets we are very much looking forward to 2015 continuing on the success that we saw last year.