Speculative development may increase, says LSH
The amount of unused land being purchased for potential development could increase this year, according to Lambert Smith Hampton's National Industrial & Distribution Report 2010.
Within the report, it said speculative development may return in areas where there are more shortages, but only on a restricted basis and development and completions are not expected to outstrip demand.
Lambert Smith Hampton said availability is expected to remain high with the continued release of "second-hand space" onto the market and "competition from occupiers for new space, in areas where supply is tight will put upward pressure on rental values".
Andrew Aherne, head of industrial and logistics at Lambert Smith Hampton's Manchester office, said: "Last year the market was geared highly in favour of the occupier. In addition to flexible leases, there were also a large number of deals undertaken as landlords competed heavily to see vacant space filled and occupiers took advantage of falling capital values by investing in freeholds for their own occupation.
"However, the ongoing shortage of speculative new development and marginal influx of 'grey' space means that prospects for values stabilising during 2010 are very high."
Michael Alderton, head of Lambert Smith Hampton's industrial and logistics division, added: "In certain areas, speculative development will return earlier than expected but only on a restricted basis, and development completions are not expected to outstrip demand."
"Our findings are certainly encouraging and we are starting to see real improvements in the industrial sector, however, there is still a huge oversupply of second-hand space in the market as inefficient businesses continue to suffer."
Lambert Smith Hampton's report predicted internet and food retailers will continue to drive the market.
In LSH's report it said:
- A total of 13.2m sq ft of floor space was acquired in the North West in 2009, which was broadly in line with take-up recorded in 2008 but higher than the previous three years
- Availability in Manchester and Liverpool fell by 15-20% over 2009 due to the strong levels of take-up
- The latter part of 2009, saw demand for large distribution units pick up. The main focus of demand has been from the retail sector. B&M Bargains' acquisition of Rockpoint's The Vault, a 620,000 sq ft building in Speke, was used as an example
- Prime rental values fell in both Manchester and Liverpool in 2009, while Crewe and Runcorn have seen values remain at end 2008 levels
