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Demand in South Wales for Large Industrial Units Continues to Surpass Expectations

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Demand in South Wales for large industrial units continued during the first half of 2017, with around 1.45 million sq ft of recorded transactions above 50,000 sq ft, according to the latest research from property consultancy Knight Frank.

The take-up figure represented a 450,000 sq ft increase on the same period in 2016 and a 650,000 sq ft increase on the first six months of 2015.

Google: Trident Industrial Park Area

Neil Francis, partner in the industrial agency team of Knight Frank in Cardiff, said:

“In line with recent trends, two thirds of these transactions were purchases by owner occupiers.”

He added:

“The largest transaction during this period was the sale of 250,000 sq ft at Trident Park, Cardiff to the Welsh Government, which has subsequently leased the space to Bad Wolf for use as a studio and office scheme for independent television production – a move that highlights how significant and popular the creative industries sector has become within South Wales.”

Whilst demand continued to outweigh supply for modern units along the M4 corridor it was positive that the first half of the year (H1) witnessed three companies acquiring units north of the M4. The BBI Group moved to 120,000 sq ft in Crumlin, Sharp Clinical secured 108,000 sq ft in Tredegar and Treforest Glass doubled its size by relocating to 53,000 sq ft in Tonyrefail.

“All have an existing presence in South Wales and by expanding they are safeguarding local jobs whilst also committing to adding to their workforce over the next couple of years,” said Neil Francis.

On the supply side for units above 50,000 sq ft there remained approximately 4.1 million sq ft available, with Grade A stock accounting for less than five per cent of this. The lack of quality stock had resulted in rents for better units in good locations continuing to increase, whilst incentives had hardened as landlords took advantage of high demand versus low availability.

Neil Francis said:

“On the land supply side there remains a number of serviced development sites immediately available with good accessibility to the M4 motorway. However, the costs of construction, measured against the level of rents or sales values that are achievable, still make new-build development marginal, which has resulted in limited developer interest.

“In certain circumstances demand received for these sites has been from the motor trade and there have been some land sales, at higher levels than traditional industrial values, from operators wanting to construct new showrooms on the edge of busy industrial locations.”

He added that multi-let industrial estates with asset management opportunities, and single-let investments to a strong covenant, continued to prove attractive to investors seeking value for money. This had been evidenced by the recent sales of Cook Court in Ocean Park, Cardiff; the disposal of the Amazon unit at Celtic Business Park, Newport; and the demand being shown in the multi-let West Point, Cardiff.

Looking ahead, Neil Francis said that with a lack of quality stock remaining in the market there would be a number of requirements for units above 50,000 sq ft that would remain unsatisfied in 2017.

“Unfortunately, this means the take up of 3 million sq ft achieved in Wales in 2016 is unlikely to be met or bettered this year,” he commented.

He believed that the lack of quality stock could soon be assisted by the introduction of the Property Development Grant which the Welsh Government had invited interest in earlier this year. It was reported that demand was high, with a number of developers eager to secure the funding required to make development viable.

“If successful we anticipate that by the end of 2017 a number of speculative schemes will be announced that could satisfy some of these development requirements,” he said.

“There are also several Government-led initiatives that will impact sentiment within the market. Occupiers and developers are particularly eager to understand how the M4 Relief Road will progress, and whether the Severn Bridge Tolls will be scrapped.

“Positive decisions on both will provide improvements for the whole of South Wales and assist in attracting further inward investment into the area from occupiers looking to benefit from opportunities that present better value for money than those over the Severn Bridge.”