Key breakthrough for industrial property in West Midlands
The market for industrial property in West Midlands is beginning to improve, says Lambert Smith Hampton, with the first speculative construction of large industrial warehousing in the region by IM Properties seen as a key breakthrough.
The Coleshill-based investment and development company is to build two logistics units totalling 334,500 sq ft at its Birch Coppice Business Park off the M42 in North Warwickshire. Alex Carr, director of industrial & logistics at Lambert Smith Hampton’s Birmingham team, says this is a major sign of confidence in the economic recovery and the region. He points out that there has been no speculative construction of distribution units over 100,000 sq ft in the region since 2008. Work is due to start this month and complete in January 2014.
To encourage more such speculative schemes, he notes, the government will exempt newly built commercial property completed between 1 October this year and 30 September 2016 from empty property rates for the first 18 months.
Developers are coming under increased pressure to consider speculative schemes as the remaining available Grade A industrial space in the West Midlands dwindles. Meanwhile landlords of key existing buildings in the region are holding out for strong headline rents and longer leases, he points out. Incentives have also hardened – some landlords are now unwilling to offer more than six months’ rent free on a five-year lease. Across the region there are now only five new buildings left on the market that are more than 50,000 sq ft in size, Lambert Smith Hampton notes: two of these are now under offer, so true availability is even lower. Occupiers may be forced to consider Grade B space, refurbishments or design-and-build solutions, the firm says.
There is a notable difference between the north and south of the West Midlands region – the south is currently seeing higher rents, take-up and investment, along with lower yields and availability. Occupiers are attracted to the area’s location close to the “golden triangle” motorway network and the key automotive industry hubs in Birmingham, Wolverhampton and Coventry. “It is here that we expect to see the most rental growth and the majority of any speculative development in coming months,” Lambert Smith Hampton adds.
The firm expects further speculative development in the region to be in the range of 100,000 sq ft – 200,000 sq ft. It says key development sites include First Industrial’s Prime 10 in Wolverhampton (detailed consent for 412,605 sq ft), St Francis and Opus’s 22-acre Blueprint site with potential rail freight link at Wednesbury, IM Properties’ Hub site in Witton, and F&C Reit’s Nucleus site in Lichfield. “Overall, there is a good level of unsatisfied demand and we expect this to be reflected in increased industrial market activity in the region as a whole,” Alex Carr adds.