Prologis Ao Crewe
Tritax paid £36m for part of AO's Crewe distribution centre, in January 2018

Industrial deals top £450m for first half of 2018

In a market buoyed by large portfolio deals, more than £453m changed hands in 43 industrial investment deals in the North West in the first six months of the year, according to the July market update report by B8 Real Estate.

The firm said that the total represents a post-recession record for the North West, beating the mark of £357m set in the first half of 2017.

On the occupational side, 11 transactions of more than 90,000 sq ft each accounted for 2m sq ft of take-up, a 40% increase on the first half of 2017 and the highest H1 volume since 2015. B8 said that there continues to be strong demand in the 100,000 sq ft to 200,000 sq ft segment, along with the “mid-box” segment between 25,000 sqft and 60,000 sq ft.

Prime distribution rents are now established at £6.25 to £6.50/sq ft for prime large industrial, with prime SME/multi-let space going for £7 to £7.50/sq ft.

Significant portfolio deals included the Pebble portfolio, bought by M&G, and the Magnus and Powerhouse portfolios purchased by Blackstone/M7 – without those deals, the H1 total transacted would be broadly in line with the five-year average of £250m.

Major deals for single assets included Tritax Big Box REIT’s £36m acquisition of AO.com’s Crewe distribution facility at 5.35%; Toolstation at Stakehill, bought by IM Properties for £13.85m at 5.19%, and Olympic Court in Salford, picked up by Portsmouth City Council, which has also invested in a Manchester office building this year.

With prime properties trading well, B8 said, there has been more secondary and tertiary stock coming to the market. However, it said, “demand remains patchy and pricing needs to be realistic, as a number of these assets have struggled to sell”.

Along with the 2m sq ft-plus of big box space traded in H1, B8 said that a further 1.4m sq ft of deals are in solicitors’ hands, while known requirements such as Amazon, Ikea and Home Bargains remain unfulfilled. Overall take-up for 2018 is predicted to hit 4m s ft to 5m sq ft.

Key occupier deals on the first half were cited as the 373,000 sq ft Movianto deal at Haydock Green, the market’s largest pre-let; a 98,000 sq ft new build deal with Globus at Trafford Park; and 129,000 sq ft let to Countryside Properties in Warrington at £5.95/sq ft, all deals advised on by B8. The firm said the Globus deal, at £6.50, sets a record prime rent for the North West, while the Countryside lease is a new high for second-hand space.

Other large deals in the big box market included TJ Hughes taking the 170,000 sq ft Space 170 in Liverpool and Royal Mail signing for 346,000 sq ft with Mountpark at Omega.

While occupier demand remains strong in the SME space, increased build costs have led to minimal speculative development, contributing to low void rates and climbing rents for second-hand space.

The full report is available on request from B8.

Your Comments

Read our comments policy here