Lack of quality stock contributes to reduced industrial property take up in Wales in 2019: Knight Frank

The lack of available good quality stock and the time lag in completing some major lettings  contributed to a reduction in take up of large industrial premises in Wales in 2019, compared with the previous two years.

According to global property consultancy Knight Frank’s research, the total take up in Wales of units over 50,000 sq ft in the second half of 2019 (H2) was 775,000 sq ft over seven recorded transactions. This resulted in annual take up in 2019 of circa 1.4 million sq ft, 600,000 sq ft less than the figures the firm reported in 2018 and almost 1 million sq ft less than 2017.

Neil Francis, head of the Industrial & Logistics division of Knight Frank in Cardiff, said:

The decline in take up would indicate that the market has struggled this year but the reality is that there are still a number of requirements remaining unsatisfied and much of the better quality stock has either already been transacted or is currently under offer.

Knight Frank reported that, whereas in previous years take up had been dominated by freehold sales to local occupiers, the figures for the second six months of 2019 included three lettings to national occupiers looking to expand and relocate within the region.

Neil Francis said’

“In Newport, Howard Tennes and Safran Seats have secured 195,000 sq ft and 135,000 sq ft respectively, whilst in Kenfig Industrial Estate, Port Talbot, Oxis Energy have signed a new lease on this recently refurbished 96,000 sq ft unit where the landlord had spent over £1.5 million in refurbishing. Following the fit out Oxis will establish a plant to produce components for batteries.

“These three lettings completed in the final two months of the year boosted the final figures reported and resulted in the 2019 annual take figure of circa 1.4 million sq ft.

“It has also recently been announced that Ineos Automotive will be manufacturing its new 4 x 4 vehicle in a new-build 750,000 sq ft  facility at Brocastle in Bridgend. Site development is now under way to support planned start of production in 2021. This, in addition to the growth of Aston Martin in St Athan, will boost the manufacturing and assembly sector within South Wales, especially given the recent closures of other companies in the automotive sector.”

According to the Knight Frank report, 2019 also saw increased activity in the Urban Logistics market as customer expectations rose for online shopping deliveries.

Whilst there is no ‘one size fits all’ solution, an essential factor is that the occupier is close to its customer base in order to offer fast turnaround times, “ said Neil Francis.

This has resulted in DPD occupying a new purpose built 60,000 sq ft warehouse in Swansea, and DX acquiring warehouse space in Bridgend and Newport.”

In terms of availability the closure of Quinn Radiators in Newport had released approximately 1 million sq ft of industrial space to the market, which offered the owner the opportunity to sub-divide and provide good quality space close to Junction 28 of the M4 Motorway. This, together with a number of closures, had resulted in availability in Wales for units over 50,000 sq ft at circa 4.5 million sq ft – some 1.5 million more than reported at the half way stage of 2019.

Unfortunately, much of the stock being released to the market is older, not adaptable and in poorer secondary locations and with Grade A space at its lowest for years better quality stock is required,” said Neil Francis.

Looking ahead, he said that on the mid box and larger shed market the changing shift in retail was creating a number of requirements and Knight Frank expected even more entries to the market in the years to come.

With a lack of good quality stock in the region, occupiers are having to consider new build. Those with operations throughout the UK are not baulking at the high headline rents being quoting as to them it is more important to have the right building in the right location and they are happy to wait,” Neil Francis said.

 

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