The amount of industrial space acquired across the North West in 2010 increased by 8% on the previous year to 14.3m sq ft, according to Lambert Smith Hampton.
Within LSH's national industrial and distribution report 2011, it said increased demand was focussed on prime space yet, due to a lack of speculative development in previous years, Grade A space was limited and quickly absorbed.
Consequently, LSH said quality second-hand space accounted for over 84% of take-up in 2010.
Andrew Aherne, head of industrial and logistics agency for LSH in the North West, said: "As we progress through 2011 it is unlikely that sufficient prime space will be available to meet the increased demand in the market. Developers have already responded to this by acquiring strategic land buying and we expect a return to new development in 2011 on a pre-let and pre-sale basis, which will be quickly followed by speculative development where demand is strong and space shortage most acute."
The research found that take-up in the distribution sector soared, with no less than 13 transactions undertaken on buildings over 175,000 sq ft. Activity emanated mainly from the retail arena but was also boosted by demand from the supply chain and manufacturing sectors.
Despite demand in the North West reaching a five year high, LSH said availability rose to 64.9m sq ft, an increase of 15.7% on 2009. However, LSH said the figure gives a distorted impression, as much of the stock returning to the market is obsolete, lower quality, obsolete stock.
LSH said the key area where the shortage of good quality stock is likely to be greatest is Manchester, which has an availability rate of just 5.8% compared to the regional average of 10.7%.
Prime rental values continued to decline throughout 2010, with the highest fall recorded in Warrington at 9.3%.
Aherne added: "We expect that rental values for lower quality buildings in secondary locations will decline further this year, before stabilising in 2012. The strongest rental 'bounce' will be in established locations in units over 50,000 sq ft, where there are shortages. Headline rents have remained resilient and we have already seen incentives on lease agreements reducing when there is limited space in prime areas.
"Our findings show that the North West's industrial and logistics sector is resilient in that there has been significant turnover of accommodation and we expect this to continue in 2011. In established locations where there is a lack of quality space we expect development to start this year. In secondary areas more dependent on the public sector, the outlook is a little bleaker."
Lambert Smith Hampton's report said:
- The largest amount of available space was in the North West, with 18.6m sq ft available, 18.5% of total market availability, followed by the West Midlands, 15.5%, and Yorkshire & The Humber, 14.2%
- Funding constraints and uncertainty have caused developers to shy away from the Greater Manchester market but there were some bespoke developments undertaken including JD Sports signing to 616,000 sq ft distribution centre on Wilson Bowden Developments' Kingsway Business Park in Rochdale
- Bolton-based developer James Industrial acquiring 61 acres fronting the M57 in Knowsley from Prysmian Cables & Systems for at a price rumoured to be over £5m was regarded as a key deal. James Industrial plans a mixed use new residential and industrial warehouse development for the site