Download - UK Industrial Property Trends Today - Hawke Ridge · 2 | OnPoint UK Industrial Property Trends Today – March 2014 take-up in units from 1,000 sq ft upwards totalled 95.4 million

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UK Industrial Property Trends TodayIssue 5 | March 2014

UK Industrial Property Trends Today• Totalindustrialfloorspacetake-uprose28%in2013comparedwith

2012.Thisyearweexpectdemandtomatchorexceedthe2013levelastheUKeconomygathersmomentum.

• Availablesupplycontinuedtofall.Attheendof2013totalindustrialavailabilitywas17%lowercomparedwith12monthsearlier.

• AsatFebruary2014therewasaround2.1millionsqftofindustrialfloorspacespeculativelyunderconstructionnationally.Weexpectspeculativedevelopmenttopick-upthisyear,althoughstilltoremainrelativelysubduedwhencomparedwiththepre-recessionpeak.

• Thereisashortageofprimeinvestmentstockavailableinthemarket,sothisyearweexpectsecondarystocktobecomemorefavourabletoinvestorsand,asaresult,thearbitragebetween primeandsecondaryyieldstonarrow.

2 | OnPointUKIndustrialPropertyTrendsToday–March2014

take-upinunitsfrom1,000sqftupwardstotalled95.4millionsqftin2013,28%upon2012.Thepercentageincreaseintake-upin2013wasgreatestforbigboxunitsof100,000sqftandover,whichincreasedby46%,whereasthetake-upofsmallandmedium-sizedunitsbetween1,000sqftto99,999sqft,increasedby21%.

EveryregioninGBregisteredanincreaseintake-upin2013comparedwith2012apartfromtheNorthEast,whichposteda16%decrease.Walesrecordedthelargestincreaseintake-uplastyear,registeringanincreaseof82%in2013comparedwith2012.

Occupier demand - the national picture TheUKeconomygatheredmomentumthroughoutthecourseof2013growingby1.9%,itsstrongestratesince2007.Howevereconomicoutputisstill1.3%belowitspre-recessionpeak(Q12008).Theeconomyisexpectedtogatherpacethroughoutthecourseofthisyear.TheHMTreasury’slatestaverageofnewforecasts(February2014)showsUKGDPgrowthof2.7%over2014,whichishigherthanthelong-termtrend.

Improvingmarketsentimentandapick-upineconomicactivitylastyearsawtotaldemandforindustrialfloorspaceimprove.Totalindustrial

Introductionand overview

ThisreportprovidesacomprehensivesnapshotoftheUKindustrialpropertymarket,coveringallmainlandregionsandallsizesofpropertyfrom1,000sqftupwards.Inparticular,itreportsonoccupierdemandover2013andavailablesupplyattheendoftheyear,plusinvestmentactivityandpricing.

Whilewegiveacompletepictureofthemarket,themainfocusofthereportisonunitsbelow100,000sqft,typicallyfoundonmulti-occupiedindustrialestates.Byconcentratingonthissegment,thisstudycomplementsourotherregularUKindustrialresearchpublicationonthebigboxmarket,whichfocusesonlargelogisticsunitsof100,000sqftandover.

Thereportprovidesseparateoverviewsforeachregion,butintermsoftheoverallnationalpicturethekey take-aways are:

• Industrialtake-uptotalled95.4millionsqftin2013,28%upon2012.Take-upinunitsfrom1,000to99,999sqfttotalled65.7millionsqft,21%upon2012.

• AttheendofDecember2013,thetotalavailablesupplyofindustrialfloorspacestoodat272.6millionsqft,17%lowerthan12monthsprevious.Availabilityinunitsfrom1,000to99,999sqft

(199.0millionsqft)fellby17%,whereastheavailabilityinunitsof100,000sqftupwardsfellby15%.

• AttheendofDecember2013,only7%ofavailablespaceinunitsfrom1,000to99,999sqftwasinneworrefurbishedunits.

• Headlineprimerentalvaluesremainedlargelyunchangedoverthecourseof2013.Withashortageofprimestockandimprovingmarketconditions,incentivesmovedinlastyear.

• SpeculativedevelopmentunderconstructionatFebruary2014stoodataround2.1millionsqftacrossGB.

• Some£4.4billionwasinvestedintheUKindustrialinvestmentmarketin2013.AtthestartofMarchprimeyieldsformulti-letestateswerearound5.75%intheSouthEastand6.25-6.50%inthemajorregionalmarkets.

TheregionsinthisreportaretheGovernmentOfficeRegionsapartfromtheSouthEastandEastofEngland,whichwebreakdownbetweentheSouthEastandEastAnglia.Thetake-upandsupplydataweresourcedinitiallyfromCoStarbutsubsequentlyadaptedtofitourregionsandadjustedbyourin-housemarketintelligence.

Welcome to Issue 5 of UK Industrial Property Trends Today

OnPointUKIndustrialPropertyTrendsToday–March2014| 3

Weexpectthatalargeproportionoftheavailablefloorspacenationallyconsistsofpoorerqualitybuildingswhichmanyoccupierswouldconsiderfunctionallyobsolete.Nationally,attheendofDecember2013,only7%oftotalavailabilityinunitsfrom1,000to99,999sqftcomprisedneworrefurbishedstock.

Speculative development under construction, February 2014

South East

Greater London

West Midlands

North West

Scotland

Total: c. 2.1 million sq ft

East Midlands

Wales

Yorkshire &Humberside

South West

2%1%

8%

8%

23%20%

5%3%

30%

Source: JLL

Speculative developmentAsatFebruary2014,therewasaround2.1millionsqftofindustrialfloorspaceunderconstructionspeculativelyin28schemesnationally.ThisishigherthanrecordedatFebruary2013(743,000sqft)butdownonthepeakrecordedinmid-2007(15.5millionsqft). Withtwoexceptionsnonewspeculativespaceinvolvingunitsof100,000sqftandoverhasstartednationallysincetheendof2008.Thischangedin2013,duringwhichfivenewunitsstartedspeculativelyonsitetotalling920,000sqft.

Take-upincreasedacrossallsizebandsin2013comparedwith2012,withthelargestincreaseseeninunitsof100,000sqftandover.Witheconomicfundamentalsexpectedtoimprovethisyearandmarketsentimentstrongweexpectoccupierdemandtomatchorexceedthelevelpostedlastyear.

Take-up of industrial floorspace 2009 to 2013

0

20

40

60

80

100

120

20132012201120102009

1,000 - 99,999 sq ft 100,000 + sq ft

Floor

spac

e (mi

llion s

q ft)

Source:JLL/CoStar Availability AttheendofDecember2013,thetotalsupplyofimmediatelyavailableindustrialfloorspaceacrossGBstoodat272.6millionsqft,ofwhichclosetothree-quarters(73%)wasinunitsbelow100,000sqft.TotalavailabilityattheendofDecember2013was17%lowerthan12monthsprevious.

AttheendofDecember2013,availabilityinvolvingunitsfrom1,000to99,999sqftwas17%lowerthanattheendofDecember2012,whereasavailabilityinvolvingunitsof100,000sqftandoverwas15%lower.

Comparedwithrecentlevelsoftake-up(five-yearannualaverage2009-2013)totalavailabilityattheendofDecember2013equatedtolessthanthreeyearsofdemand.Availabilityinunitsfrom1,000to99,999sqftalsorepresentedlessthanthreeyearsofdemand.

Supply of industrial floorspace* by region, December 2013

East Anglia

East Midlands

Greater London

North East

North West

Scotland

South East

South West

Wales

West Midlands

Yorkshire & Humberside

3%8%

9%14%

6%

5%

13%

12%

4%6%

20%

Total: 272.6 million sq ft

Source:JLL/CoStar*Allavailablespaceinunitsof1,000sqftandover.

Regionally,thelargestfallinavailabilityin2013wasinGreaterLondon,wheretotalavailabilityfellby38%.EveryregioninGBrecordedafallinavailabilityattheendofDecember2013comparedtotheendofDecember2012.ThesmallestfallinavailabilitywasrecordedintheNorthWestwheretotalavailabilityfellby7%overthesameperiod.

Outlook

• Weexpectimprovingeconomicconditionstotranslateintocontinuingindustrialpropertydemandwithtake-upin2014likelytomatchorexceedthelevelpostedin2013.

• Weexpectsupplytocontinueonadownwardtrend.Ouragentsarereportingagoodlevelofenquiries,andspeculativedevelopment,whilepickingup,remainsmodestoverall.

• Weexpectspeculativedevelopmenttopickupoverthecourseof2014,withanumberofnew‘bigbox’unitsandsmallermulti-letschemesalreadyunderway.

• JLL’slatestforecastsindicatearelativelymodestincreaseinrentsoverthenextfouryears(2014–2017)althoughweexpectgrowthtobestrongerinandaroundLondon.

• Withashortageofprimeinvestmentstockinthemarketweexpectinvestorstolookmorefavourablyatsecondaryassets.Asaresult,weexpectthearbitragebetweenprimeandsecondaryyieldstonarrowthisyear.


Occupier demandIndustrialtake-upinGreaterLondontotalled4.7millionsqftin2013,4%upon2012.Take-upinvolvingunitsfrom1,000sqftto99,999sqfttotalled4.0millionsqft,2%upon2012.Take-upinvolvingunitsof100,000sqftandoverincreasedby14%lastyear.

Unitsbetween20,000and49,999sqftsawthelargestincreaseintake-up,withfloorspacetransactedinthissizeband33%higherin2013comparedwith2012.


0

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2

3

4

5

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7

8

9

20132012201120102009

1,000 - 99,999 sq ft 100,000 + sq ft

Floor

spac

e (mi

llion s

q ft)

Source:JLL/CoStar

Availability AttheendofDecember2013,therewassome10.8millionsqftofindustrialfloorspaceavailableacrossGreaterLondon,38%lowerthanattheendofDecember2012.AvailabilityinGreaterLondonaccountedfor4%oftheGBtotal.

Theavailablesupplyinunitsbelow100,000sqft,whichtotalled9.2millionsqft,was38%lowerthanattheendofDecember2012.Around11%oftheavailablefloorspaceinthissizebandcomprisedneworrefurbishedfloorspace,comparedwithaGBaverageof7%.

AttheendofDecember2013,availabilityinunitsof1,000to99,999sqftrepresentedlessthantwoyearsofsupplycomparedwiththeannualaveragetake-uprateoverthepastfiveyears(2009–2013).

Supply (≥1,000 sq ft) at end of December 2013

1,000 – 4,999

5,000 – 9,999

10,000 – 19,999

20,000 – 49,999

50,000 – 99,999

100,000 +

10%15%

17%

20%27%

11%

Source:JLL/CoStar

Speculative developmentAtFebruary2014therewasaround472,000sqftofindustrialfloorspacespeculativelyunderconstructioninGreaterLondon.Allunitsunderconstructionaresmallerthan100,000sqft.

Prime industrial rents (£ per sq ft)PrimeheadlinerentsincreasedinParkRoyal,StratfordandBromley-byBowoverthe12-monthperiodtoDecember2013andedgedupinHeathrowforoffairsidestock.Elsewhererentsremainedstablebutthereisincreasingpressureonrentsandincentivesasavailablesupplycontinuestodiminish.

Location December 2012 December 2013Heathrow(Airside) 25.00 25.00Heathrow(OffAirside) 14.00-15.00 15.00WiderHeathrowArea 12.50-13.00 12.50-13.00ParkRoyal 13.00 13.50-13.75Stratford 9.50 10.00Bromley-by-Bow 9.50 10.00Croydon 8.00 8.00

Assumesminimumof10,000sqft.

Greater London

“TheGreaterLondonindustrialmarketcontinuestostrengthenasevidencedin2013,bystrongdemand,translatingintogreatertake-upacrossthesizespectrum,comparedwith2012.Availabilityhasalsodramaticallyfallen,puttingpressureonsupply.Asaresult,rentsarestartingtohardenandincentivesarereducingparticularlyinthe‘hotspots’ofParkRoyal,Heathrow,Chessington,CroydonandCanningTown.Rightlyso,confidencecontinuestogrowamongstthedevelopers,fundsandpropertycompanies.Whilstsomeearlyspeculativedevelopmentshavefoundthegoingtoughafterreachingcompletiontheseschemeshavenow,ingeneral,foundtraction.Themarketbarometerindicatesthatthereismoreplannedspeculativedevelopmenttocomeoverthecomingmonths.”

Gus Haslam, Director (London)+44 (0)20 7087 5301 [email protected]

Greater London agency comment


South East

Occupier demandIndustrialtake-upintheSouthEasttotalledaround15.6millionsqftin2013,19%upon2012.Take-upinvolvingunitsfrom1,000sqftto99,999sqfttotalled12.6millionsqft,15%upon2012,whiletake-upinvolvingunitsof100,000sqftandovertotalled2.9millionsqft,45%upon2012.

Thelargestincreaserecordedintake-upinvolvingunitsfrom1,000sqftto99,999sqftwasinthe20,000to49,999sqftsizeband.Floorspacetransactedinthiscategoryincreasedby39%comparedwith2012.


0

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10

12

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18

20

20132012201120102009

1,000 - 99,999 sq ft 100,000 + sq ft

Floor

spac

e (mi

llion s

q ft)

Source:JLL/CoStar

Availability AttheendofDecember2013,therewassome39.1millionsqftofindustrialfloorspaceavailableacrosstheSouthEastmarket,19%lowerthanattheendofDecember2012.AvailabilityintheSouthEastaccountedfor14%oftheGBtotal.


AttheendofDecember2013,availabilityinunitsof1,000to99,999sqftrepresentedaroundtwoandahalfyearsofsupplycomparedwiththeannualaveragetake-uprateoverthepastfiveyears(2009–2013).


1,000 – 4,999

5,000 – 9,999

10,000 – 19,999

20,000 – 49,999

50,000 – 99,999

100,000 +

13%15%

15%

18%26%

13%

Source:JLL/CoStar

Speculative developmentAsatFebruary2014therewerefiveschemesspeculativelyunderconstructiontotallingaround630,000sqftintheSouthEast.Thisincludestwounitsspeculativelyunderconstructionwhicheachtotalover100,000sqft.

Prime industrial rents (£ per sq ft)PrimeheadlinerentsfellslightlyinGuildford,butremainedstableelsewhere.

Location December 2012 December 2013Slough 12.00 12.00Basildon 6.50 6.50WestThurrock 7.50 7.50Dartford 7.50 7.50HighWycombe 8.50 8.50Guildford 10.00 9.75


“Take-upthroughoutthesizerangeshasincreased,butofcontinuedconcernisthelackofreplacementstockbeingbroughtforwardthroughthedevelopmentprocess.Ofgreatencouragementisthecurrentstartsonsiteswithanincreasingnumberofspeculativeschemesplannedfrommid-yearonwardswhichwilladdress,inpart,thedecreasinglevelofGradeAstockintheregion.”

Andy Harding, Director (London)+44 (0) 20 7087 5310 [email protected]

South East agency comment


Occupier demandAround2.7millionsqftofindustrialfloorspacewastakenupinEastAngliain2013,3%upon2012.Take-upinvolvingunitsfrom1,000sqftto99,999sqfttotalled2.1millionsqft,16%upon2012,whereastake-upinvolvingunitsof100,000sqftandoverwas26%downon2012.

Thelargestincreaseintake-upinvolvingunitsfrom1,000sqftto99,999sqftwasinunitsfrom10,000to19,999sqft,wherefloorspacetransactedin2013was90%upon2012.


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

20132012201120102009

1,000 - 99,999 sq ft 100,000 + sq ft

Floor

spac

e (mi

llion s

q ft)

Source:JLL/CoStar

AvailabilityAttheendofDecember2013,therewassome7.2millionsqftofindustrialfloorspaceavailableacrosstheEastAngliamarket,18%downontheendofDecember2012.AvailabilityinEastAngliaaccountedfor2.6%oftheGBtotal.


AttheendofDecember2013,availabilityinunitsof1,000to99,999sqftrepresentedaroundtwoandahalfyearsofsupplycomparedwiththeannualaveragetake-uprateoverthepastfiveyears(2009–2013).


1,000 – 4,999

5,000 – 9,999

10,000 – 19,999

20,000 – 49,999

50,000 – 99,999

100,000 +

12%23%

14%

17%

19%

15%

Source:JLL/CoStar

Speculative developmentTherewasnofloorspacespeculativelyunderconstructioninEastAngliaatFebruary2014.

Prime industrial rents (£ per sq ft)PrimeheadlinerentsremainedstableinEastAngliaoverthe12-monthperiodtoDecember2013.

Location December 2012 December 2013Peterborough 4.25 4.25Huntingdon 4.50 4.50Norwich 4.00 4.00Ipswich 4.75 4.75


East Anglia

“SupplyremainsverytightacrosstheregionwithadistinctlackofGradeAstock.Therearesignsthatsomespeculativedevelopmentislikelytostarttotakeplace,butthisisonaverylimitedscale.Rentsstillremainstaticacrosstheboard,butwiththecontinuinglackofsupply,thismaychangeduring2014.

Landlordsarestillfocusedonincomeasopposedtoholdingoutforfullrents,whichagainmaychangeduringthecourseof2014.Appetiteforsecondhandspaceremainsverypricedriven,andcreatesatwo-tiermarket.”

James Swallow, Director (London)+44 (0) 20 7087 5312 [email protected]

East Anglia agency comment


South West

Occupier demandWith6.0millionsqftofindustrialfloorspacetakenupintheSouthWestin2013,overalltake-upacrosstheregionwas8%higherthanin2012.Take-upinvolvingunitsfrom1,000sqftto99,999sqfttotalled3.9millionsqft,15%upon2012.However,take-upinvolvingunitsof100,000sqftandoverwas3%downon2012.

Thetake-upofsmallunitsfrom5,000to9,999sqftincreasedby29%on2012,thesharpestriseforallsizebandsbetween1,000sqftand99,999sqft.


0

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6

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8

20132012201120102009

1,000 - 99,999 sq ft 100,000 + sq ft

Floor

spac

e (mi

llion s

q ft)

Source:JLL/CoStar

AvailabilityAttheendofDecember2013,therewassome17.0millionsqftofindustrialfloorspaceavailableacrosstheSouthWestregion,17%lowerthanattheendofDecember2013.AvailabilityintheSouthWestaccountedfor6.3%oftheGBtotal.

Theavailablesupplyinunitsbelow100,000sqft,whichamounted12.9millionsqft,was17%downontheendofDecember2012.Around10%oftheavailablefloorspaceinthissizebandcomprisedneworrefurbishedfloorspace,comparedwithaGBaverageof7%.

AttheendofDecember2013,availabilityinunitsof1,000to99,999sqftrepresentedaroundthreeyearsofsupplycomparedwiththeannualaveragetake-uprateoverthepastfiveyears(2009–2013).


1,000 – 4,999

5,000 – 9,999

10,000 – 19,999

20,000 – 49,999

50,000 – 99,999

100,000 +

14%24%

12%

16%

20%

14%

Source:JLL/CoStar

Speculative developmentAtFebruary2014therewasoneschemespeculativelyunderconstructionintheSouthWesttotallingaround15,000sqft.

Prime industrial rents (£ per sq ft)Primeheadlinerentsremainedunchangedoverthe12-monthperiodtoDecember2013intheSouthWest.

Location December 2012 December 2013Bristol 7.25 7.25Exeter 6.50 6.50Plymouth 5.25 5.25Swindon 5.50 5.50


“Withimprovingbusinessconfidence,thelackofspeculativedevelopmentanddecliningstockofgoodqualitysecondhandbuildingshaveseenrentsandincentivepackageshardeningwithcompetitionforthegoodqualitystock.

Asweareunlikelytoseeanylargescalespeculativedevelopmentoverthenext12monthsoccupiersarestartingtoturntothedesignandbuildmarkettoprovideabespokesolutionintheabsenceofstandingbuildingstosatisfytheirrequirement.”

Paul Baker, Director (Bristol)+44 (0)117 930 5780 [email protected]

South West agency comment


“Withthesupplyofnew/modernavailableunitscontinuingtofallanddemandremainingrobust,thereisnowmorepressureonoccupierstoconsiderabuildtosuitsolution.

Atpresent,occupiersareoftenunawareofthelackofexistinggoodqualitystockandareill-preparedtogodownthenewbuildroute.Asaresult,thesiteswhichcanofferthemostrapidnewbuildsolutionsareattractingmostoftheinterest.Inaddition,wherespeculativedevelopmenthasstartedthereisevidencethatsomeofthesebuildingsarebeingletquickly.”

Carl Durrant, Director (Birmingham)+44 (0)121 214 9950 [email protected]

West Midlands agency comment

Occupier demandIndustrialtake-upintheWestMidlandstotalledaround14.2millionsqftin2013,29%upon2012.Take-upinvolvingunitsfrom1,000sqftto99,999sqfttotalled9.1millionsqft,13%upon2012.Take-upinvolvingunitsof100,000sqftandovertotalled5.2millionsqftin2013,72%upon2012.

Thelargestincreaseinvolvingunitsfrom1,000sqftto99,999sqftwasinunitsfrom20,000to49,999sqft,wherefloorspacetransactedin2013was38%upon2012.


0

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20132012201120102009

1,000 - 99,999 sq ft 100,000 + sq ft

Floor

spac

e (mi

llion s

q ft)

Source:JLL/CoStar

AvailabilityAttheendofDecember2013,therewassome35.0millionsqftofindustrialfloorspaceavailableacrosstheWestMidlandsmarket,17%lowerthanattheendofDecember2012.AvailabilityintheWestMidlandsaccountedfor13%oftheGBtotal.


AttheendofDecember2013,availabilityinunitsof1,000to99,999sqftrepresentedlessthanthreeyearsofsupplycomparedwiththeannualaveragetake-uprateoverthepastfiveyears(2009–2013).


1,000 – 4,999

5,000 – 9,999

10,000 – 19,999

20,000 – 49,999

50,000 – 99,999

100,000 +

11%

25%12%

16%

23%

13%

Source:JLL/CoStar

Speculative developmentAtFebruary2014therewasaround415,000sqftofindustrialfloorspacespeculativelyunderconstructionintheWestMidlandsinthreeschemes.

Prime industrial rents (£ per sq ft)Overthe12-monthperiodtoDecember2013primeheadlinerentsstartedtoedgeupinBirmingham,BlackCountryandSolihull.

Location December 2012 December 2013Birmingham 5.75 5.75-6.00BlackCountry 5.00–5.25 5.00-5.50Solihull 6.25 6.50-6.75Coventry 5.75 5.75-5.95Stoke-upon-Trent 5.00 5.00


West Midlands


“Despiteadeclineintake-upin2012,thelatestreporthighlightsasignificantturnaroundandacontinuedperiodofstrongactivityintheEastMidlandsmarketwith11.1msqftofspacetransactedin2013.The‘GoldenTriangle’continuestobethefocusofdemandandactiverequirements,howeverwheresupplyexistsoutsideofthiscorearea,thereisalsoreasonableactivity,particularlyforGradeAspace.Stocklevelshavecontinuedtoreduceandwithverylittlespeculativedevelopment,thisisexpectedtocontinuewithaconsiderableshortageofGradeAspaceover100,000sqft.2013experiencedanothergoodyearofactivityinthedesignandbuildmarketand,inparticular,MarkhamValeatJ.29a,M1,wherefurthernewbuildsareon-siteandwillbedeliveredduring2014.Withagoodlandsupplythroughouttheregionandanimprovinglevelofgoodqualityrequirements,furtherpre-letdesignandbuildswillbedeliveredin2014.“

James Keeton, Associate Director (Nottingham)+44 (0)115 908 2141 [email protected]

East Midlands agency comment

East Midlands

Occupier demandIndustrialtake-upintheEastMidlandstotalledaround11.1millionsqftin2013,52%higherthanrecordedin2012.Take-upinvolvingunitsfrom1,000sqftto99,999sqfttotalled5.8millionsqft,14%upon2012,whiletake-upinvolvingunitsof100,000sqftandovertotalled5.4millionsqftin2013,overdoublethelevelrecordedin2012. Thelargestincreaseintake-upinvolvingunitsfrom1,000sqftto99,999sqftwasinunitsfrom10,000to19,999sqft,wherefloorspacetransactedin2013was24%upon2012.


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4

6

8

10

12

14

16

20132012201120102009

1,000 - 99,999 sq ft 100,000 + sq ft

Floor

spac

e (mi

llion s

q ft)

Source:JLL/CoStar

AvailabilityAttheendofDecember2013,therewassome22.9millionsqftofindustrialfloorspaceavailableacrosstheEastMidlandsmarket,16%lowerthanattheendofDecember2012.AvailabilityintheEastMidlandsaccountedfor8.4%oftheGBtotal.

Theavailablesupplyinunitsbelow100,000sqfttotalled15.5millionsqft,16%lowerthanattheendofDecember2012.Around6%oftheavailablefloorspaceinthissizebandcomprisedneworrefurbishedfloorspace,comparedwithaGBaverageof7%.

AttheendofDecember2013,availabilityinunitsbetween1,000and99,999sqftrepresentedaroundtwoandahalfyearsofsupply

comparedwiththeannualaveragetake-uprateoverthepastfiveyears(2009–2013).


1,000 – 4,999

5,000 – 9,999

10,000 – 19,999

20,000 – 49,999

50,000 – 99,999

100,000 +

8%

32%9%

14%

23%14%

Source:JLL/CoStar

Speculative developmentTherewasoneunitspeculativelyunderconstructionintheEastMidlandsatFebruary2014whichtotalled110,000sqft.

Prime industrial rents (£ per sq ft)Primeheadlinerentsremainedstableoverthe12-monthperiodtoDecember2013.

Location December 2012 December 2013Northampton 5.50 5.50Leicester 5.25 5.25Derby 5.25 5.25Nottingham 5.50 5.50



Occupier DemandIndustrialtake-upintheNorthWesttotalledaround11.5millionsqftin2013,13%upon2012.Take-upinvolvingunitsfrom1,000sqftto99,999sqfttotalled8.0millionsqft,17%upon2012.Take-upinvolvingunitsof100,000sqftandovertotalled3.5millionsqftin2013,4%upon2012.

Thelargestincreaserecordedintake-upinvolvingunitsfrom1,000sqftto99,999sqftwasinunitsfrom10,000to19,999sqft,wherefloorspacetakenupin2013roseby47%comparedwith2012.


0

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20132012201120102009

1,000 - 99,999 sq ft 100,000 + sq ft

Floor

spac

e (mi

llion s

q ft)

Source:JLL/CoStar

AvailabilityAttheendofDecember2013,therewassome54.0millionsqftofindustrialfloorspaceavailableacrosstheNorthWestmarket,6.7%lowerthanattheendofDecember2012.AvailabilityintheNorthWestaccountedfor19.8%oftheGBtotal.

Theavailablesupplyinunitsbelow100,000sqfttotalled34.7millionsqft,14%lowerthanattheendofDecember2012.Around7%oftheavailablefloorspaceinthissizebandcomprisedneworrefurbishedfloorspace,matchingtheGBaverage.

AttheendofDecember2013,availabilityinunitsof1,000to99,999sqftrepresentedlessthanfouryearsofsupplycomparedwiththeannualaveragetake-uprateoverthepastfiveyears(2009–2013).


1,000 – 4,999

5,000 – 9,999

10,000 – 19,999

20,000 – 49,999

50,000 – 99,999

100,000 +

9%

36%10%

13%

19%13%

Source:JLL/CoStar

Speculative developmentAtFebruary2014therewasapproximately177,000sqftofindustrialfloorspacespeculativelyunderconstructionintheNorthWestinthreeschemes.Allunitsunderconstructionweresmallerthan100,000sqftinsize.

Prime industrial rents (£ per sq ft)PrimeheadlinerentsincreasedinWarringtonoverthe12-monthperiodtoDecember2013butelsewhereremainedunchanged.

Location December 2012 December 2013South Manchester 5.75 5.75TraffordPark 6.00 6.00Warrington 5.75 6.25Liverpool 4.50 4.50


North West

“TheNorthWestpictureissimilartothatacrosstherestofthecountry,withadearthofgoodqualityexistingbuildingsinprimelocationsacrossallsizeparameters.Asaconsequence,occupiersarehavingtomakecompromisestoidentifyabuildingthatworksforthemorsatisfytheirrequirementsbyDesignandBuildsolutions,withtheresultanttimedelays.

Withrenewedinterestfromcertainfunds,wedoanticipatesomelimitedspeculativedevelopmentintheregionduringtheyear.Thisisnotjustlimitedtolarge‘bigboxes’–atthesmallerendofthemarket,thosedeveloperswhohavebuiltoutspaceoverthelast12to18monthshavebeenrewardedwithhighrentallevelsandfreeholdprices.Notwithstanding,tenantswhoarewillingtoacquiresecondarymulti-letspacecanstillfindlandlordswillingtoofferflexibledealsatattractiverents.”

Daniel Burn, Director (Manchester) +44 (0)161 238 6226 [email protected]

North West agency comment


Yorkshire &Humberside

Occupier demandIndustrialtake-upacrossYorkshire&Humbersidetotalledaround12.2millionsqftin2013,69%upon2012.Take-upinvolvingunitsfrom1,000sqftto99,999sqfttotalled7.4millionsqft,38%upon2012.Take-upinvolvingunitsof100,000sqftandovertotalled4.8millionsqft,overdoublethelevelrecordedin2012. Thelargestincreaserecordedintake-upinvolvingunitsfrom1,000sqftto99,999sqftwasinunitsfrom50,000to99,999sqft,wherefloorspacetransactedin2013was66%upon2012.


0

2

4

6

8

10

12

14

20132012201120102009

1,000 - 99,999 sq ft 100,000 + sq ft

Floor

spac

e (mi

llion s

q ft)

Source:JLL/CoStar

AvailabilityAttheendofDecember2013,therewassome32.3millionsqftofindustrialfloorspaceavailableacrosstheYorkshireandHumbersidemarket,17%downontheendofDecember2013.AvailabilityinYorkshireandHumbersideaccountedfor11.8%oftheGBtotal.




1,000 – 4,999

5,000 – 9,999

10,000 – 19,999

20,000 – 49,999

50,000 – 99,999

100,000 +

9%

31%9%

14%

23%14%

Source:JLL/CoStar

Speculative developmentAtFebruary2013therewasaround38,000sqftofindustrialfloorspacespeculativelyunderconstructioninoneschemeinYorkshire&Humberside.

Prime industrial rents (£ per sq ft)Primeheadlinerentsremainedunchangedoverthe12-monthperiodtoDecember2013.

Location December 2012 December 2013Leeds 5.75 5.75Doncaster 4.50 4.50Hull 4.25 4.25Wakefield 5.00 5.00


“DemandhasbeenanimprovingpicturesinceQ42013andcontinuestoberobustthroughouttheYorkshireregionforunitsunder100,000sqft.Negotiationsaremovinginthelandlord’sfavourwithincentivepackagesbeginningtohardenandheadlinerentsstartingtoseeupwardsmovement,particularlywhereproductismodern.Theregionisfacinganacuteshortageofgoodqualitystockandeventhoughweareseeingselectiveinstancesofspeculativedevelopment,itwillnotsatisfydemand.Buildtosuitwillbecomemoreprevalentoverthenext12-24months.

Thebigshedmarketremainsactive,althoughdemandislargelyretail-ledandfocusedonkeysitesorbuildingsmostlyinestablishedlocationsaroundWakefieldorDoncaster.Themanufacturingsectorisstartingtogeneratemoredemand,althoughthismostlyremainssub100,000sqft.”

Richard Harris, Director (Leeds)+44 (0)113 235 5249 [email protected]

Yorkshire & Humberside agency comment


Occupier demandIndustrialtake-upintheNorthEasttotalledaround3.9millionsqftin2013,16%downon2012.Take-upinvolvingunitsfrom1,000sqftto99,999sqfttotalled3.2millionsqft,12%upon2012,whereastake-upinvolvingunitsof100,000sqftandovertotalledaround740,000sqft,59%downon2012.TheNorthEastwastheonlyregiontorecordanoveralldeclineintake-upin2013comparedwith2012.

Thelargestincreaserecordedintake-upinvolvingunitsfrom1,000sqftto99,999sqftwasinunitsfrom50,000to99,999sqft,wherefloorspacetransactedin2013was29%upon2012.


0

1

2

3

4

5

6

20132012201120102009

1,000 - 99,999 sq ft 100,000 + sq ft

Floor

spac

e (mi

llion s

q ft)

Source:JLL/CoStar

AvailabilityAttheendofDecember2013,therewassome15.0millionsqftofindustrialfloorspaceavailableacrosstheNorthEastmarket,11%lowerthanattheendofDecember2012.AvailabilityintheNorthEastaccountedfor5.5%oftheGBtotal.

Theavailablesupplyinunitsbelow100,000sqfttotalled11.3millionsqft,11%lowerthanattheendofDecember2012.Around7%oftheavailablefloorspaceinthissizebandcomprisedneworrefurbishedfloorspacematchingtheGBaverage.

AttheendofDecember2013,availabilityinunitsof1,000to99,999sqftrepresentedaroundthreeandahalfyearsofsupplycomparedwiththeannualaveragetake-uprateoverthepastfiveyears(2009–2013). Supply (≥1,000 sq ft) at end of December 2013

1,000 – 4,999

5,000 – 9,999

10,000 – 19,999

20,000 – 49,999

50,000 – 99,999

100,000 +

10%

25% 9%

14%

24%

18%

Source:JLL/CoStar

Speculative developmentAsatFebruary2014therewasnoindustrialfloorspacespeculativelyunderconstructionintheNorthEast.

Prime industrial rents (£ per sq ft)Primeheadlinerentsremainedunchangedoverthe12-monthperiodtoDecember2013.

Location December 2012 December 2013Newcastle 5.00 5.00TeamValley 5.50 5.50Stockton-upon-Tees 4.00 4.00Washington 4.50 4.50Sunderland 4.25 4.25


North East

“Demandforindustrialandwarehousespacecontinuestobedrivenbythemanufacturingsector,generatinganumberofB2andB8requirementsinkeylocationsclosetothemanufacturingbase.Asspaceistakenup,theserequirementswillneedtogofurtherafieldtobesatisfied,thushavingapositiveeffectonthewiderNorthEastregion.ThewaveofspeculativedevelopmentripplingoutoftheSouthEastandMidlandsisyettoreachtheregion.Therefore,thestockofgoodqualityspaceisextremelylimited,especiallyinsomesizebrackets.Weanticipateasmallnumberofspeculativeschemeswillbeginin2014,withadditionalmomentumbeinggainedthroughincreaseddemandtowardstheendoftheyearandinto2015.”

Richard Harris, Director (Leeds)+44 (0)113 235 5249 [email protected]

North East agency comment


Scotland

Occupier demandIndustrialtake-upinScotlandtotalledaround9.0millionsqftin2013,46%upon2012.Take-upinvolvingunitsfrom1,000sqftto99,999sqfttotalled6.8millionsqft,65%upon2012,andtake-upinvolvingunitsof100,000sqftandovertotalled2.2millionsqftin2013,9%upon2012.

Thelargestincreaserecordedintake-upinvolvingunitsfrom1,000sqftto99,999sqftwasinunitsfrom50,000to99,999sqftwherefloorspacetransactedin2013wasovertwoandahalftimeshigherthan the level recorded in 2012.

Theleveloftake-uppostedin2013wasthehighestannuallevelrecordedoverthepastfiveyears(2009-2013).


0

1

2

3

4

5

6

7

8

9

10

20132012201120102009

1,000 - 99,999 sq ft 100,000 + sq ft

Floor

spac

e (mi

llion s

q ft)

Source:JLL/CoStar

AvailabilityAttheendofDecember2013,therewassome24.6millionsqftofindustrialfloorspaceavailableacrossScotland,16%lowerthanattheendofDecember2012.AvailabilityinScotlandaccountedfor9%oftheGBtotal.


AttheendofDecember2013,availabilityinunitsof1,000to99,999sqftrepresentedaroundthreeandahalfyearsofsupplycomparedwiththeannualaveragetake-uprateoverthepastfiveyears(2009–2013).


1,000 – 4,999

5,000 – 9,999

10,000 – 19,999

20,000 – 49,999

50,000 – 99,999

100,000 +

9%

24% 10%

16%

21%

20%

Source:JLL/CoStar

Speculative developmentAtFebruary2013therewasaround162,000sqftofindustrialspacespeculativelyunderconstructioninsixschemesinScotland.Allunitsunderconstructionweresmallerthan100,000sqft.

Prime industrial rents (£ per sq ft)PrimeheadlinerentsedgedupinGlasgowandAberdeenoverthe12-monthperiodtoDecember2013butremainedunchangedelsewhere.

Location December 2012 December 2013Edinburgh(SouthGyle) 7.00 7.00RestofEdinburgh 6.00-6.50 6.00-6.50Glasgow 6.00 6.50Aberdeen 8.50 8.75


“In2013EdinburghannouncedthefirstspeculativedevelopmentinoverfiveyearsatWestEdinburghBusinessPark,SouthGyle.Therehavebeensomelandsalesandasmallnumberofpre-letrequirementscirculatingduetoalackoflargerstock.TherehasbeenmoresustaineddemandanddwindlingstockinkeystrategiclocationssuchasSighthill,SouthGyle,NewbridgeandotherareassuchasRosythandDunfermline,allclosetotheM8,M9,ForthRoadBridgeandtheforthcomingQueensferryCrossing.Aberdeencontinuestohavestrongdemandcombinedwithalackofexistingstock,withsomedevelopersspeculativelydevelopingunitsandhandlinglargerBTSrequirementsfortheoilandgas,andsubseasector.Thewestcoastindustrialpropertymarketwitnessedsignificantsignsofimprovementin2013,withstrongerdemandacrossthewholespectrumofbuildingsandsizerange,increasedlevelsoftransactionsandimprovementinoccupierconfidence.Primehotspotsremainmotorwaycorridors,suchasCambuslangandEurocentral.Secondarylocations,suchasEastKilbrideandCumbernauld,haveseenhigherlevelsofenquiriesthroughouttheyear.Mirroringhistorictrends,themajorityofdemandisforunitsbelow10,000sqft.”

Kirsty Palmer, Associate Director (Edinburgh) +44 (0)131 243 2222 [email protected] McCracken, Associate Director (Glasgow)+44 (0) 141 567 6635 [email protected]

Scotland agency comment


“Muchimprovedmarketconditionsin2013providereasonablegroundsforoptimismintheWelshindustrialmarket,althoughitisclearthattherecoveryisfocuseduponnewandmodernfloorspace.In2013,industrialtake-uproseby82%onthepreviousyear,withaconsequentfallintotalfloorspaceavailabilitytolevelsapproachingthosepre-downturn.Anumberoffactorshavecontributedtothisimprovedpicture,mostnotablyrisingconfidence,butalsoevidenceofre-shoringinthemanufacturingsector,overflowdemandfromtheMidlandsandthechangingnatureofdistribution.”

Chris Sutton, Head of Cardiff Office (Cardiff) +44 (0)29 2072 6014 [email protected]

Wales agency comment

Occupier demandTotalindustrialtake-upinWaleswasaround4.4millionsqftin2013,82%upon2012.Take-upinvolvingunitsfrom1,000sqftto99,999sqfttotalled2.9millionsqft,39%upon2012.Demandforlargeunitsrosemoresharply,withtake-upinvolvingunitsof100,000sqftandoverupfourfoldon2012.

Thelargestincreaserecordedintake-upinvolvingunitsfrom1,000sqftto99,999sqftwasinunitsfrom20,000to49,999sqft,wherefloorspacetransactedin2013wasalmostdoublethelevelrecordedin 2012.


0

1

2

3

4

5

6

20132012201120102009

1,000 - 99,999 sq ft 100,000 + sq ft

Floor

spac

e (mi

llion s

q ft)

Source:JLL/CoStar

AvailabilityAttheendofDecember2013,therewassome14.7millionsqftofindustrialfloorspaceavailableacrossWales,27%downontheendofDecember2012.AvailabilityinWalesaccountedfor5.4%oftheGBtotal.

Theavailablesupplyinunitsbelow100,000sqfttotalled9.3millionsqft,27%lowerthantheendofDecember2012.Around9%oftheavailablefloorspaceinthissizebandcomprisedneworrefurbishedfloorspace,comparedwithaGBaverageof7%.



1,000 – 4,999

5,000 – 9,999

10,000 – 19,999

20,000 – 49,999

50,000 – 99,999

100,000 +

9%

37%

8%

11%

19%16%

Source:JLL/CoStar

Speculative developmentAsatFebruary2014therewerethreeschemesspeculativelyunderconstructioninWalestotalling72,000sqft.

Prime industrial rents (£ per sq ft)PrimeheadlinerentsedgedupinCardiff,Newport,SwanseaandtheWrexham/Deesideareaoverthe12-monthstoDecember2013.

Location December 2012 December 2013Cardiff 5.00 5.50Newport 4.25 4.50Swansea 4.00 4.25Wrexham/Deeside 3.00 3.50


Wales


UK investmentmarket performance

Investor demand and supplyInvestmentintheUKindustrialpropertymarket,includingbothmulti-letestatesandsingle-letdistribution,totalled£4.4billion2013.Thiswas70%upon2012(£2.6billion)anditshighestlevelinthelastsevenyears(2007–2013).

Appetiteforindustrialpropertypickedupin2013withstrongdemandfrombothdomesticandinternationalbuyers.InvestmentinUKindustrialpropertywasatitssecondhighestlevelsinceourrecordsbeganin2004.2006wastheonlyyeartorecordahigherlevelofinvestmentinindustrialpropertyat£4.9billion.

Industrial investment volumes

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

201320122011201020092008

GBP

Millio

n

Source: JLL

Weexpectdemandformulti-letassetstoremainfocusedonprimeestatesinLondonandtheSouthEastthisyear.WithconfidenceinthemarketstrongandglobalmoneytargetingtheUK,themainconstraintonactivitywillbealackofavailablestockinthemarketasinvestorsremainreluctanttoselltheirprimeassets.

Industrial yieldsAtthebeginningofMarch2014primeyieldsformulti-letestatesintheSouthEastandregionallystoodat5.75%and6.25-6.50%respectively.Regionalyieldsmovedinbyaround75-100bpsovertheyeartoMarch.Investordemandwillremainfocusedonprimestock,butastheavailabilityofthisstockcontinuestofallinvestorswilllookatgoodqualitysecondaryassetsandthearbitragebetweenprimeandsecondaryyieldswillnarrow.

Industrial yields10

9

8

7

6

5

4

3

2

1

0

Dec 0

2

Dec 0

3

Dec 0

4

Dec 0

5

Dec 0

6

Dec 0

7

Dec 0

8

Dec 0

9

Dec 1

0

Dec 1

1

Dec 1

3

Dec 1

2

London Multi-Let

10 year Average London Multi-let Yield: 5.98%10 year Average Regional Multi-let Yield: 7.01%

10 year Average London Single-let Yield: 6.08%10 year Average Regional Single-let Yield: 6.85%

% pe

r ann

um

Regional Multi-Let London Single-Let Regional Single-Let

Source: JLL

IPD performanceTheUKindustrialmarketproducedatotalreturnof5.6%inQ42013,accordingtotheIPDQuarterlyIndex.DistributionwarehousesoutperformedstandardindustrialsinQ4withatotalreturnof5.8%comparedwith5.6%.

IntheyeartoQ42013theUKindustrialmarketproducedatotalreturnof11.8%.Standardindustrialspostedatotalreturnof11.2%comparedwith13.3%fordistributionwarehouses.

Allindustrialcapitalvaluesregisteredanincreaseof3.9%inQ42013.Bothstandardindustrialsanddistributionwarehousespostedanincreaseof3.9%.

Allindustrialrentalvaluesincreasedby0.6%inQ42013;bothstandardindustrialsanddistributionwarehousesregisteredanincreaseof0.5%.

AttheendofDecember2013theIPDMonthlyIndexshowedanindustrialvacancyratefortheUKof9.9%(ofincome)whichwasdownon12monthsearlier(11.9%)anddownfromarecentpeakof18.2%inAugust2009.

ForecastsCurrentmodel-basedforecastsfromJLLindicatethatindustrialpropertywilldeliveranaverageannualtotalreturnof8.4%overthefiveyears2014-2018withdistributionwarehousesoutperformingstandardindustrialsat9.4%and8.1%respectively.

Contacts

Occupational

Tenant Representation Investment

Development Lease Advisory Research

©COPYRIGHTJONESLANGLASALLE2014.ThispublicationisthesolepropertyofJonesLangLaSalleIP,Inc.andmustnotbecopied,reproducedortransmittedinanyformorbyanymeans,eitherinwholeorinpart,withoutthepriorwrittenconsentofJonesLangLaSalleIP,Inc.Theinformationcontainedinthispublicationhasbeenobtainedfromsourcesgenerallyregardedtobereliable.However,norepresentationismade,orwarrantygiven,inrespectoftheaccuracyofthisinformation.Wewouldliketobeinformedofanyinaccuraciessothatwemaycorrectthem.JonesLangLaSalledoesnotacceptanyliabilityinnegligenceorotherwiseforanylossordamagesufferedbyanypartyresultingfromrelianceonthispublication.

UKIndustrialPropertyTrendsToday–March2014

On Point reportsfromJLLincludequarterlyandannualhighlightsofrealestateactivity,performanceandspecialisedsurveysandforecaststhatuncoveremergingtrends.

www.jll.co.uk

Andy Harding DirectorNationalIndustrial&Logistics+44(0)[email protected]

Gus Haslam DirectorNationalIndustrial&Logistics+44(0)[email protected]

Richard Evans DirectorNationalIndustrial&Logistics+44(0)[email protected]

Cameron MitchellDirectorNationalIndustrial&Logistics+44(0)[email protected]

Michael Alderton DirectorNationalIndustrial&Logistics+44(0)[email protected]

Sam FairbairnAssociateDirectorNationalIndustrialInvestment+44(0)[email protected]

Chris NorthDirectorNationalInvestment+44(0)[email protected]

Michael HancockDirectorNationalIndustrial&Logistics+44(0)[email protected]

Jon SleemanDirectorUKResearch+44(0)[email protected]

Tessa EnglishSeniorResearchAnalystUKResearch+44(0)[email protected]

Carl Durrant DirectorNationalIndustrial&Logistics+44(0)[email protected]

Daniel Burn DirectorNationalIndustrial&Logistics+44(0)[email protected]

Paul Baker DirectorNationalIndustrial&Logistics+44(0)[email protected]

Richard HarrisDirectorNationalIndustrial&Logistics+44(0)[email protected]