Take-up of units under 50,000 sq ft has risen by 62% in the past three years, according to research by CBRE industrial agents in Manchester.
CBRE found that take-up done in the smaller end of the North West industrial market was as follows:
- 2012 5.7m sq ft
- 2013 7.2m sq ft
- 2014 9.4m sq ft
Steve Capper, associate director at CBRE Manchester, said: “There has been much talk in 2015 about the strength of the North West’s industrial sector with a particular focus on the speculative development of the larger logistics units of 100,000 sq ft and above. Whilst it is true that there has been strong recovery in this sector with almost 2.5m sq ft under construction and an additional 1.5m sq ft planned, we should not ignore the significance of the sub 50,000 sq ft and multi-let market which is where developers are turning their attention.”
CBRE’s research shows that the smaller build sector was badly affected by the downturn in the economy with occupiers becoming increasingly risk averse and cost sensitive. With demand reducing and supply increasing the market experienced softening rents and increasing incentives which heavily favoured the tenant. With the odd exception, this supply and demand mismatch put an end to speculative development for several years with no high-profile multi-let industrial estates until 2013.
Capper continued: “There is now a significant weight of demand in the smaller industrial sector which is currently showing a shortage of supply of good quality modern products. A number of developers are already seeking to take advantage of the market shift and we estimate that in the North West there is now approximately 650,000 sq ft of multi-let and smaller stand-alone units already committed.”
Russells, Capital & Centric, Chancerygate and Redsun are among the wave of developers active in this part of the market.
Capper said the keen demand from smaller occupiers looking for new premises “is leading to rental growth, reducing incentives, reducing voids and hardening yields. Although this risk profile will not suit all, with demand likely to continue to increase, it will be those developers who are able to bring forward opportunities now who will take advantage of this buoyant market sector.”