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Industrial market update

Industrial Market Update

Demand remains strong, while online retail and residential development fuel industrial space shortage in London.

Occupier demand has remained steady for industrial property, particularly throughout outer London and the Home Counties despite the slowing of transactions observed in some other sectors. Stock levels are still below the normal threshold due to changes in organisational needs of online retailers and due to the absorption of industrial land and buildings by housing developers. We anticipate that stock levels will start to increase over the next six months to reflect the fillip in take-up activity in post-recession 2012 and lease terms then granted.

The RICS Q1 commercial market survey reported strong rental and capital growth forecasts, with a preference for investments in the industrial sector from overseas buyers. We have experienced steady enquiries throughout the last quarter and anticipate a continued demand from well-funded purchasers who are competing for limited freehold opportunities. 

A notable market trend that is affecting the south-east is the number of online retailers expanding their base in the UK. In Essex, the largest deal of 2016 was Amazon’s acquisition of their new fulfilment centre at Tilbury Dock and Strettons’ acquisition of a 152,000 sq. ft. warehouse distribution centre for ITS was the largest deal along the M11 corridor that year (CoStar).

Amazon and ITS, as other retailers with an exceedingly prominent online presence, required much larger storage capacity to meet consumer demand and tripled from their prior 45,000 sq ft premises. Over 80% of the commercial development schemes approved in 2017 are under 200,000 sq ft, which may not meet the demand of the market. Therefore companies may have to shift how they approach acquisition strategies and distribution centre logistics.

The ongoing residential development applications and potential infrastructure projects planned across London are helping to regenerate many of the capital’s areas for new growth opportunity. While positive on the whole, this comes at a cost for industrial supply as new housing developments are contributing to the imbalance with tenants seeking well-located premises.

The current London Plan that the Greater London Authority prepared predicted that 1,200 acres of industrial land would be repurposed for mixed-use developments between 2010 and 2031, which is currently undergoing a review. In light of this, a trend we continue to see from our Harlow office is the increase in occupiers looking outside of the M11 corridor to help avoid the rising rental costs that have resulted from the shortage.

Some of our recent notable transactions include:

  • Harlow - Modern freehold exchanged at circa £120 per ft²
  • Tottenham N17- Freehold sale agreed at circa £175 per ft²
  • Walthamstow E17- Creative space let at in excess of £20 per ft²
  • Hackney E8- Creative studios let at £25 per ft²
  • Hackney Wick E3- 11,000 ft² let at £12 per ft²

To learn more or discuss the value of your property, please don't hesitate to contact our dedicated industrial team.

020 8520 9911  |  industrial@strettons.co.uk