Industrial & Distribution
Floorspace Today



September 2010
IDFT
I N D U STRIAL & DISTRIBUTION FLOO R S PA C E T O D AY



Executive summary                                          ...
King Sturge: Industrial & Distribution Floorspace Today



Overview                                                       ...
Table 1: Industrial property market availability (million m²) as at June 2010
                                            ...
King Sturge: Industrial & Distribution Floorspace Today




                                 SCOTLAND




                ...
TOTAL GB
INDUSTRIAL
MARKET
Greater London            6

South East                7

East Anglia               8

South We...
King Sturge: Industrial & Distribution Floorspace Today




Greater London                                                ...
The South East                                                                                                            ...
King Sturge: Industrial & Distribution Floorspace Today




East Anglia                                                   ...
South West                                                                                                                ...
Industrial & distribution floorspace today
Industrial & distribution floorspace today
Industrial & distribution floorspace today
Industrial & distribution floorspace today
Industrial & distribution floorspace today
Industrial & distribution floorspace today
Industrial & distribution floorspace today
Industrial & distribution floorspace today
Industrial & distribution floorspace today
Industrial & distribution floorspace today
Industrial & distribution floorspace today
Industrial & distribution floorspace today
Industrial & distribution floorspace today
Industrial & distribution floorspace today
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Industrial & distribution floorspace today

  1. 1. Industrial & Distribution Floorspace Today September 2010
  2. 2. IDFT I N D U STRIAL & DISTRIBUTION FLOO R S PA C E T O D AY Executive summary “Welcome to the • Available industrial floorspace in Great Britain turned downwards for the first September 2010 edition of time in five years during the opening half of 2010. Tentative improvements in Industrial and Distribution occupier demand coupled with slowing rates of release of secondhand stock, resulted in a decline in total floorspace available. Floorspace Today • At the end of June 2010, availability totalled 23.791 million m² representing This publication reports on the latest a decrease of 0.6% since December. Whilst only a small reduction, it signifies a turning point in the current supply cycle and suggests that overall industrial trends in the UK industrial market vacancy is now beginning to stabilise. across Great Britain. Published twice • The Midlands recorded the largest reduction in available floorspace during a year in March and September, the first half of 2010, as a number of big shed distribution transactions created a notable dent in the overhang of supply. it presents our latest survey of • The availability of new floorspace contracted by a further 14.0%, or 439,000m², availability, speculative development in the six months to June 2010. New units now represent 11.3% of the overall and prime rents for every region. Our available stock in Great Britain. industrial floorspace survey has been • Improved demand for the new big shed sector, and a slowdown in the return published since 1975 and provides of secondhand big sheds, caused total availability in large buildings to fall. At the end of June 2010 there was 8.060 million m² available in units of 10,000m² and an invaluable time series of industrial over, representing a decrease of 2.2% since December. market data. • In the big box distribution market, the supply of new units over 10,000m² fell by 288,190m² during the first half of 2010, with availability now 39% lower than Our latest survey shows industrial its peak in March 2008. supply declining for the first time in • During the recent recession, occupier take-up for new units over 10,000m² five years and with the UK economic slumped to a 15-year low in terms of floorspace transacted, but since the weakest period of demand during the first half of 2009, take-up levels have shown steady recovery now gaining momentum, improvement. the market outlook is becoming more • With development finance remaining relatively scarce, speculative starts positive. However, with expectations are still rare, but an increase on the levels recorded in January suggests signs of a subdued and fragile recovery, of a tentative uplift in developer confidence. An increase of 15% compared with January, brings the total under construction at the end of July, to 96,498m² across occupiers and investors are likely 48 schemes. to remain cautious over the next • The UK economic recovery accelerated much faster than expected during the six months and it will take time for second quarter of the year (GDP growth of 1.1%), marking the third quarter of positive growth. Whilst recent indicators have given a welcomed boost to the market confidence to return. economy, expectations remain cautious with the recovery set to be subdued and fragile. If you require further information on • According to the IPD Quarterly Index, average industrial rental values this publication, or have a specific continued to fall in the first half of the year, although the rate of decline eased. query relating to industrial property Rents contracted by 1.1% in the first six months of 2010 and forecasts indicate an overall decline in industrial rental values of 2.1% this year, followed by 0.4% markets, please do not hesitate to in 2011. contact me or one of my colleagues at King Sturge. Regional agency contacts are detailed on the relevant pages and on the inside back cover of the report.” Anna Behan Industrial Research 1
  3. 3. King Sturge: Industrial & Distribution Floorspace Today Overview The return of secondhand large buildings to the market has slowed and the improved take-up in the new big shed sector, has Availability caused total availability in large buildings to fall. At the end of June there was 8.060 million m² available in new and secondhand units The total level of available supply turned downwards for the over 10,000m², representing a decrease of 2.2% since December first time in five years during the opening half of 2010, following and the first significant depletion of large stock since the end of a prolonged trend of rising industrial availability in Great Britain, 2005. Whilst the supply of secondhand big sheds has been on an lasting for nine consecutive surveys. Tentative improvements upward trend since mid 2008, the increase in the past six months in occupier demand, coupled with slowing rates of release of was very modest. The big shed distribution section at the back secondhand stock, resulted in a decline in total floorspace available. of the publication, looks more closely at the market for new units over 10,000m². At the end of June 2010, availability totalled 23.791 million m², representing a decrease of 0.6% since December. Whilst only a Speculative development small reduction, it signifies a turning point in the current supply cycle and suggests that overall industrial vacancy is now beginning Following three years of declining levels of development, and to stabilise. an 18-month low of speculative completions, there has been a modest increase in the level of floorspace under construction. Chart 1: Available industrial floorspace With development finance remaining relatively scarce, speculative starts are still rare, but an increase on the levels recorded in January 25 suggests signs of a tentative uplift in developer confidence. England & Wales Scotland 20 With an increase of 15% compared with January, a total of 96,498m² was under construction at the end of July across 48 schemes. million m2 15 Chart 3: Speculative floorspace under construction 10 1,600 140 floorspace m2 No. of schemes 5 1,400 120 Floorspace (thousands m²) 1,200 100 0 1,000 80 00 01 02 03 04 05 06 07 08 09 10 20 20 20 20 20 20 20 20 20 20 20 800 Source: King Sturge Research Excludes units below 500m2. 60 600 Surveys taken in April, August & December. As from 2005, the surveys are taken in June and December. 40 400 200 20 Regionally, the most significant changes in supply were recorded in the Midlands, where availability contracted by 8.6% in the East 0 0 M -01 Se -01 Ja 01 M -02 Se -02 Ja 02 M -03 Se -03 Ja 03 M -04 Se -04 Ja 04 Ju 5 Ja 05 Ju 6 Ja 06 Ju 7 Ja 07 Ju 8 Ja 08 Ju 9 Ja 09 Ju 0 0 and 3.5% in the West. The Midlands witnessed a number of large 0 0 0 0 0 1 l-1 p- p- p- p- n- l- n- l- n- l- n- l- n- l- n- n ay n ay n ay n ay Ja distribution transactions over the first six months of the year, creating a notable dent in the overhang of supply. Source: King Sturge Research The South East and East Anglia also contributed to declining floorspace, with 0.1% and 1.0% less supply available in June The highest levels of development were recorded in the North respectively. The remaining regions recorded only modest West which accounted for 17.5% of the total for GB, followed by increases in availability, with the exception of Wales where supply the South West and the South East contributing 15.6% and 15.4% was 5.4% higher at mid-year. respectively. Chart 4: Speculative floorspace under construction by region at Chart 2: New space as a percentage of total availability July 2010 18% 16% 2.3% North West 2.9% 3.4% South West 14% 3.8% 17.5% South East 12% 3.9% Scotland 10% 8.7% East Midlands 8% 15.6% East Anglia 6% 11.3% Yorkshire & Humberside 4% West Midlands 15.4% North 15.3% 2% Greater London 0% Wales 00 01 02 03 04 05 06 07 08 09 10 20 20 20 20 20 20 20 20 20 20 20 Source: King Sturge Research Source: King Sturge Research The economy The availability of new floorspace peaked at the end of 2008 (at The UK economic recovery accelerated much faster than expected 3.523 million m² or 15.5% of the total supply) and fell by a further during the second quarter of the year, marking the third quarter of 14.0% during the first half of 2010, with development remaining positive growth. Whilst recent indicators have given a welcomed very constrained. As occupiers took advantage of preferential boost to the economy, expectations remain cautious with the terms offered on new stock, supply contracted by 439,000m² in recovery set to be subdued and fragile. the six months to June, to 2.694 million m². This is comparable to levels at mid 2007 and new space now represents only 11.3% of The latest estimate for GDP in Q2 showed surprisingly robust the overall available stock in Great Britain. growth of 1.1%, which was twice as strong as forecast, but 2
  4. 4. Table 1: Industrial property market availability (million m²) as at June 2010 Availability (million m²) Availability percentage change as at June 2010 on December 2009 Total New Large Total New Large England & Wales 21.426 2.626 7.294 -0.8 -13.8 -2.7 Scotland 2.365 0.068 0.766 1.8 -22.1 2.6 Great Britain 23.791 2.694 8.060 -0.6 -14.0 -2.2 North 1.438 0.162 0.408 0.7 -17.0 3.2 North West 2.813 0.473 1.178 0.7 -5.2 4.8 Yorkshire & Humberside 2.882 0.631 1.186 0.3 -9.5 3.7 East Midlands 1.838 0.347 0.822 -8.6 -21.9 -20.8 West Midlands 3.602 0.336 1.359 -3.5 -20.0 -7.5 East Anglia 0.520 0.083 0.145 -1.0 -4.5 9.8 South West 1.478 0.121 0.455 0.2 -10.5 4.3 Wales 1.599 0.039 0.598 5.4 -16.4 -5.9 South East 5.256 0.434 1.145 0.2 -16.7 1.8 - Greater London 1.839 0.154 0.280 0.7 -14.5 3.5 - Rest of South East 3.417 0.280 0.865 -0.1 -17.9 1.3 Premises below 500 m² excluded with a surge in the notoriously volatile construction sector largely the fragile state of the UK banking sector, but many commentators responsible for the buoyancy. As a result, many anticipate that this expect hikes to begin in earnest early next year. figure could be revised downwards in subsequent releases and that growth at this rate is unlikely to be sustained over the coming As a result of the radical spending cuts and fiscal policies, GDP quarters. forecasts have been revised downwards, with growth of 1.1% expected this year, followed by a revised 2.1% in 2011. However, The strength of GDP was still a surprise in a quarter dominated with the strong rebound in GDP during Q2, these forecasts may by the General Election. The emergence of a Liberal-Conservative be revised upwards in coming months. Coalition after an inconclusive May poll, eased fears about policy drift and uncertainty. However it also brought with it an As the economic recovery gets underway, albeit at modest pace, aggressive programme of spending cuts and tax increases in a the outlook for the industrial sector is more positive. The market June Emergency Budget that was tougher than many expected. remains difficult and occupiers are cautious, but demand is expected The new Chancellor introduced an additional £40 billion of fiscal to gradually improve as the economy gathers momentum. With tightening, with aims to bring the current budget back to balance national supply now stabilising and speculative development very by 2014/15. This was generally welcomed by markets, though constrained in the foreseeable future, the availability of new and there remain concerns that the spending cuts are so severe that good quality stock is rapidly diminishing. The return of secondhand they may hit the economic recovery, acting as too severe a drag stock has also now slowed, so in some regions the market is on growth over the next 12 months. becoming increasingly favourable to landlords and developers. The UK Purchasing Managers Index (PMI), a lead indicator of Prime headline rents have generally remained stable across the economic activity, highlights that the strong rebound in economic country, but have been largely propped up by generous incentive output may subsequently soften. Figures for the service, packages on offer. In areas with supply side constraints, these manufacturing and construction sectors all weakened, with many incentives are now tightening and if occupier demand continues businesses citing the looming public sector cuts as likely to hinder to improve, some upward movement in rents could be seen in future orders. However, the manufacturing sector is holding up selective locations towards the year-end. best, with increases in new orders resulting in a still healthy, expanding, PMI reading. According to the IPD Quarterly Index, average industrial rental values continued to fall in the first half of the year, although the Business failures have continued to slow, since the most dramatic rate of decline has eased, and 2009 is likely to mark the bottom of fallout recorded at the beginning of 2009. The number of company the rents cycle. Rents contracted by 1.1% in the first six months insolvencies as reported by the Insolvency Service, showed 20% of 2010 and our central forecast indicates an overall decline in fewer compulsory liquidations within England & Wales during the industrial rental values of 2.1% this year, followed by 0.4% in second quarter compared with the same time last year. 2011. Positive rental growth is not expected to return until 2012, albeit at a modest rate of 0.5%. Labour market figures are also encouraging. In the three months Chart 5: GDP Growth, 1990 - Q2 2010 to June, unemployment edged down to 7.8% of the workforce 6 6 with 49,000 fewer people looking for work than in the previous 5 5 three months. This continues the downward drift in jobless figures 4 4 since the start of 2010. 3 3 2 2 Outlook 1 1 The Bank of England has held interest rates at the historic 0 0 -1 -1 low of 0.5% since March last year, but as recovery proceeds, -2 -2 attention will increasingly turn to the outlook for monetary policy. -3 -3 Speculation about the timing of a rise in interest rates is increasing. -4 -4 All measures of inflation have risen since the end of 2009 but this -5 -5 Quarterly growth % Annual growth % largely reflects the effects of last year’s interest rate cuts and VAT -6 -6 rises. These effects should fade, though inflation is expected to -7 -7 remain fairly high over the coming months. Therefore, a move to 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 raise interest rates is not yet justified by economic figures, or by Source: ONS 3
  5. 5. King Sturge: Industrial & Distribution Floorspace Today SCOTLAND NORTH YORKS & HUMBERSIDE NORTH WEST EAST MIDLANDS WEST EAST MIDLANDS ANGLIA WALES LONDON SOUTH EAST SOUTH WEST *The King Sturge data in this report are based on the Standard Statistical Regions as shown above. IPD investment performance data quoted in this report are based on Government Office Regions. 4
  6. 6. TOTAL GB INDUSTRIAL MARKET Greater London 6 South East 7 East Anglia 8 South West 9 Wales 10 East Midlands 11 West Midlands 12 North West 13 Yorkshire & Humberside 14 North 15 Scotland 16
  7. 7. King Sturge: Industrial & Distribution Floorspace Today Greater London Prime industrial rents (£/m²) Location Jan 10 July 10 Change in availability - Over 6 and 12 months Heathrow 140.00 140.00 Within Greater London, total available floorspace increased by Park Royal 121.10 121.10 0.7% (13,185m²) in the six months to the end of June, to reach a Stratford 94.20 94.20 total of 1.839 million m² at the middle of the year. Bromley-by-Bow 94.20 94.20 Croydon 88.80 88.80 The availability of large buildings over 10,000m² increased by 3.5% (9,404m²) in the same period, to 279,801m² at the end of June. Assumes minimum of 1,000m². Large buildings accounted for 15.2% of Greater London’s available stock. Investment market performance The industrial market in Greater London produced a total return Available new floorspace decreased by 14.5% (26,147m²) in of 8.0% over the first half of 2010, according to the IPD Quarterly the first half of 2010 to 153,987m². This is the lowest level of Index and 26.4% in the year to June; the strongest returns new floorspace since December 2006. At the end of June, new recorded across all GB regions. floorspace accounted for 8.4% of Greater London’s available stock. Capital values increased by 4.7% in the first half of the year and Over the 12 months to June 2010, available floorspace in Greater were 18.3% higher over the 12 months to June. London increased by 3.4% (60,843m²). According to the IPD Index, rental values fell by 0.1% over the first The availability of large buildings over 10,000m² decreased by half of 2010; the smallest rental decrease across all GB regions, 1.8% (5,262m²) over the year to June. with a fall of 0.6% recorded over the year to June. Available new floorspace decreased by 24.9% (51,179m²) between We believe that prime yields in Greater London have remained June 2009 and June 2010. stable for multi-let properties over the past six months, whilst distribution yields have softened. At June yields were between 6 Greater London availability - last 10 years and 6¼% for multi-let estates and 6¼ to 6½% for large distribution 2.0 properties. Secondhand floorspace New floorspace 1.8 1.6 Greater London market performance indicators Jun 05 - Jun 10 1.4 260 Total return Index value December 2000 = 100 million m2 1.2 240 Capital growth 1.0 220 Rental value growth 0.8 200 0.6 180 0.4 160 0.2 140 0.0 120 01 02 03 04 05 06 7 8 9 10 0 0 0 20 20 20 20 20 20 20 20 20 20 100 Source: King Sturge Research 80 Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun Speculative development 05 05 06 06 07 07 08 08 09 09 10 Source: IPD The level of speculative development under construction within Greater London has been on a steep downward trend since mid 2007, with no schemes under construction speculatively at the Greater London agency comment beginning of the year. At the end of July however, there was an increase in development, with one small scheme of 2,787m² “Enquiry levels are still continuing to increase steadily with under construction, and there are a number of proposals in the clear evidence that with the gradual take-up of the better quality pipeline which are expected to start early next year. buildings two factors are arising. Firstly, whilst tenants are still able to command significant incentive packages in exchange Greater London speculative floorspace under construction for sensible lease terms, in certain areas, where supply is 180 16 becoming limited, landlords are now clearly starting to rein in Floorspace m2 No. of schemes 160 those incentives and this will continue during the remainder 14 of 2010 on a larger scale. Secondly the level of speculative 140 12 development will begin to rise with a number of modest Floorspace (000s m2) 120 10 schemes close to starting, stimulated by increasing occupancy 100 8 levels and continuing demand. The market has some way to 80 go but there are some positive signs of improving occupier 6 60 confidence in the Greater London industrial markets.” 40 4 20 2 Andy Harding, Partner (London) 0 0 020 7087 5310, andy.harding@kingsturge.com Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul 01 01 01 02 02 02 03 03 03 04 04 04 05 05 06 06 07 07 08 08 09 09 10 10 Source: King Sturge Research 6
  8. 8. The South East Prime industrial rents (£/m²) Location Jan 10 July 10 Change in availability - Over 6 and 12 months Slough 121.10 121.10 In the South East, outside of London, total available floorspace Basildon 75.35 75.35 decreased for the first time in two years, by 0.1% (3,075m²) over the first half of 2010. At the end of June there was a total of 3.417 West Thurrock 75.35 - 80.70 75.35 - 80.70 million m² available. Dartford 80.70 - 83.40 80.70 - 83.40 High Wycombe 91.50 91.50 Floorspace in large buildings of over 10,000m² increased by 1.3% Assumes minimum of 1,000m². (11,371m²) to 865,128m², representing 25.3% of the region’s total available stock. Investment market performance Available new floorspace decreased by 17.9% (60,960m²) in the The industrial market in the South East produced a total return of six months to the end of June, with new space accounting for 6.8% in the first half of 2010, according to the IPD Quarterly Index, 8.2% of the region’s total available stock. with an annual return of 20.0% for the year to June. Over the year to June 2010, available floorspace in the South Capital values in the first half of the year increased by 2.9% with East increased by 0.5% (16,732m²), which is the smallest annual an annual increase of 11.1% over the 12 months to June. increase across all regions. According to the IPD Index, rental values fell by 1.4% in the first Availability in large buildings over 10,000m² increased by 7.7% six months of the year and were 3.7% lower over the 12 months (61,969m²) over the 12-month period. to June. New floorspace availability decreased by 25.2% (94,670m²) over We believe that prime yields in the South East have remained the 12 months to the end of June 2010. stable for multi-let properties over the past six months, whilst distribution yields have softened. At June yields were between 6 South East availability - last 10 years and 6¼% for multi-let estates and 6¼ to 6½% for large distribution 4.0 properties. Secondhand floorspace New floorspace 3.5 South East market performance indicators Jun 05 - Jun 10 3.0 260 Total return Index value December 2000 = 100 2.5 240 Capital growth million m2 220 2.0 Rental value growth 200 1.5 180 1.0 160 0.5 140 0.0 120 01 02 03 04 05 06 07 08 09 10 20 20 20 20 20 20 20 20 20 20 100 Source: King Sturge Research 80 Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun 05 05 06 06 07 07 08 08 09 09 10 Speculative development Source: IPD The level of industrial floorspace under construction on a speculative basis within the South East has increased by 12% since our previous survey. At the end of July 2010 there was a South East agency comment total of 14,835m² under construction across six schemes, the “Industrial occupier demand within the South East improved largest of which comprises 4,170m² and is due for completion in September. There are a number of schemes where construction further over the first half of 2010, with a steadily increasing has been put on hold, but as new supply becomes increasingly level of enquiries and transactions within both large and smaller limited in the region, construction is expected to recommence on units. New floorspace continues to decline causing a shortage the majority of these schemes towards the end of the year. of good quality product, and occupiers are now experiencing a severe lack of this space particularly in the core industrial areas. South East speculative floorspace under construction With limited new speculative development underway, there is 300 30 now more design and build activity and pre-let development will Floorspace m2 No. of schemes continue to increase.” 250 25 Floorspace (000s m2) 200 20 Tim Johnson, Head of International Industrial Agency 020 7087 5300, tim.johnson@kingsturge.com 150 15 100 10 50 5 0 0 Jan- May Sep Jan May Sep Jan May Sep Jan May Sep Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul 01 01 01 02 02 02 03 03 03 04 04 04 05 05 06 06 07 07 08 08 09 09 10 10 Source: King Sturge Research 7
  9. 9. King Sturge: Industrial & Distribution Floorspace Today East Anglia Prime industrial rents (£/m²) Location Jan 10 July 10 Change in availability - Over 6 and 12 months Peterborough 53.82 53.82 Following a significant increase in availability in our last survey, Huntingdon 53.82 53.82 supply in East Anglia decreased by 1.0% (5,308m²) over the first Norwich 51.13 51.13 half of 2010, to reach a total of 519,590m² at the end of June. Ipswich 51.13 51.13 However, availability in large buildings increased by 9.8% Assumes minimum of 1,000m². (12,908m²) over the six months, to 144,643m². At the end of June, large buildings accounted for 27.8% of the region’s available stock. Investment market performance The industrial market in the Eastern region produced a total return Available new floorspace decreased by 4.5% (3,966m²) over of 7.2% in the first half of 2010, according to the IPD Quarterly the same period, to 83,318m², and accounted for 16.0% of East Index and 21.4% in the year to June. Anglia’s total supply at mid year 2010. Capital values in the first half of the year increased by 3.5% with Over the year to June 2010, available floorspace within East Anglia an annual increase of 12.8% for the year to June. increased by 9.9% (46,973m²). According to the IPD Index, rental values decreased by 0.7% in Availability in large buildings over 10,000m² decreased by 5.3% the first half of the year and were 2.2% lower than the same time (8,019m²) over the 12-month period. a year ago. New available floorspace decreased by 17.0% (17,018m²) over the We believe that prime yields in East Anglia have hardened to 12 months to June 2010. around 7% for multi-let estates, but softened to 7.25% for large distribution properties. East Anglia availability - last 10 years 0.7 East Anglia market performance indicators Jun 05 - Jun 10 Secondhand floorspace New floorspace 260 Total return 0.6 Index value December 2000 = 100 240 Capital growth 0.5 220 Rental value growth million m2 0.4 200 180 0.3 160 0.2 140 0.1 120 100 0.0 80 01 02 03 04 05 06 07 08 09 10 Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun 20 20 20 20 20 20 20 20 20 20 05 05 06 06 07 07 08 08 09 09 10 Source: King Sturge Research Source: IPD Speculative development Speculative development under construction within East Anglia East Anglia/South East contact increased from a very low base, by 74% in the six months since our previous survey. At the end of July 2010 there was a total Tim Johnson, Head of International Industrial Agency of 8,391m² being developed across three multi-unit estates, the 020 7087 5300, tim.johnson@kingsturge.com largest of which comprises 4,837m² and is due for completion at the end of the year. East Anglia speculative floorspace under construction 70 7 Floorspace m2 No. of schemes 60 6 Floorspace (000s m2) 50 5 40 4 30 3 20 2 10 1 0 0 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul 01 01 01 02 02 02 03 03 03 04 04 04 05 05 06 06 07 07 08 08 09 09 10 10 Source: King Sturge Research 8
  10. 10. South West Prime industrial rents (£/m²) Location Jan 10 July 10 Change in availability - Over 6 and 12 months Bristol 78.00 78.00 Within the South West, available floorspace increased by 0.2% Exeter 70.00 70.00 (3,656m²) during the first half of 2010, to reach a total of 1.478 Plymouth 56.50 56.50 million m². Swindon 59.20 59.20 Availability in large buildings over 10,000m² increased by 4.3% Assumes minimum of 1,000m². (18,632m²) in the six months, to 455,039m². At June 2010 this category accounted for 30.8% of the South West’s total supply. Investment market performance The industrial market in the South West produced a total return of Available new floorspace decreased by 10.5% (14.082m²) since 7.6% in the first half of 2010, according to the IPD Quarterly Index our last survey to 120,567m² at June 2010. New floorspace and 22.8% in the year to June. provided 8.2% of the region’s total available stock. Capital values in the first half of 2010 increased by 3.7% with an Over the 12 months to June, available floorspace in the South annual increase of 13.6% for the year to June. West increased by 6.1% (84,690m²). According to the IPD Index, rental values fell by 0.7% in the first Available floorspace in large buildings of over 10,000m² increased six months of the year and were 2.2% lower over the 12 months by 13.6% (54,425m²) in the same period. to June. New available floorspace fell by 19.2% (28,539m²) in the 12 We believe that prime yields in the South West have remained months to the end of June 2010. stable for multi-let estates, between 7½ - 7¾%, but for distribution properties yields have softened by 25bp to 6¾% at the end of South West availability - last 10 years June. 1.6 Secondhand floorspace New floorspace 1.4 South West market performance indicators Jun 05 - Jun 10 260 1.2 Total return Index value December 2000 = 100 240 Capital growth 1.0 million m2 220 Rental value growth 0.8 200 0.6 180 0.4 160 0.2 140 120 0.0 01 02 03 04 05 06 07 08 09 10 100 20 20 20 20 20 20 20 20 20 20 Source: King Sturge Research 80 Jun Dec Jun Dec Jun Dec Jun Dec Jun Dec Jun 05 05 06 06 07 07 08 08 09 09 10 Speculative development Source: IPD The level of speculative development under construction within the South West has increased by 59% over the past six months. South West agency comment At the end of July 2010, there was 15,031m² under construction across seven schemes, which represents an increase of 5,622m² “Clearly the occupier market remains subdued, but there is still a since January and 15% of the total speculative development for good undercurrent of activity throughout the region, particularly GB. in the larger size range. There are still good deals available for tenants but covenant strength is playing an increasing role in the South West speculative floorspace under construction deals that can be done with landlords being far more cautious 140 14 in their need to reduce void. The freehold market is slowly Floorspace m2 No. of schemes returning but this is partly driven by the complete lack of stock in 120 12 this sector. The continued manufacturing outfall in some areas Floorspace (000s m2) 100 10 is resulting in larger industrial premises coming to the market at 80 8 attractive pricing levels, providing good opportunities for owner occupiers. Good quality stock is proving attractive although 60 6 this is partly because speculative development remains very 40 4 constrained.” 20 2 Paul Baker, Partner (Bristol) 0 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul 0 0117 930 5780, paul.baker@kingsturge.com 01 01 01 02 02 02 03 03 03 04 04 04 05 05 06 06 07 07 08 08 09 09 10 10 Tim Western, Partner (Exeter) Source: King Sturge Research 01392 429305, tim.western@kingsturge.com 9

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