Despite the uncertainty of the past 12 months, demand for UK industrial and logistics space continued to grow and fared better than many other commercial property sectors, according to research by global property consultancy Knight Frank.
Its research shows the total take up in Wales during 2020 for industrial units over 50,000 sq ft was 2.74 million sq ft from 18 recorded transactions.
Although this included the sale of Orb Works in Newport, which accounted for 790,000 sq ft of the take up, the figures were still higher than the 1.4 million sq ft recorded in 2019 and 2.4 million sq ft in 2018.
Within these figures 1.1 million sq ft was transacted in the final quarter of the year (Q4) which highlighted how this sector has continued to grow throughout the year.
Neil Francis, head of Logistics & Industrial at Knight Frank in Cardiff, said:
“Whereas in recent years the majority of deals recorded have been in South Wales, it was pleasing to note five transactions took place in North and Mid Wales.
“These included the disposal of Boundary Park in Deeside, which was a speculative development of three units providing 84,000 sq ft. A joint venture between Trebor Developments and Maple Grove Developments, it was sold to Ifor Williams Trailers in November. It was also encouraging to see that the two former Laura Ashley units in Newtown – 163,000 sq ft and 138,000 sq ft – attracted enough local occupier interest to secure sales in excess of the asking price.”
Notable transactions within South Wales in 2020 included Urban Myths Films acquiring 164,000 sq ft leasehold in Queensway Meadows, Newport, and Great Point Media signing a long term lease at the former 178,000 sq ft Pinewood Studios in Wentloog, Cardiff.
“Both companies are within the creative industries sector, which is one of the fastest growing sectors in Wales, and the deals show commitment to the region and indicate a positive future for the industry moving forward,” said Neil Francis.
In terms of availability the closure of Ford in Bridgend released approximately 1.6 million sq ft of industrial space to the market, which together with the 1 million sq ft available at the former Quinn site in Newport distorted the overall availability figure of 6.3 million sq ft. Despite this availability there was still a lack of Grade A space throughout.
“This lack of good quality stock has encouraged logistics operators and more traditional industrial owners to consider new build,” said Neil Francis. “It is interesting to note that national operators are not baulking at the higher headline rents required, as acquiring the right building in an optimum location is essential to their business.”
This had provided developers with added confidence regarding the viability of larger scale industrial development and this had continued to improve as rental levels increased to over £6 per sq ft. St Modwen was currently on site at St Modwen Park, Newport speculatively developing 30,000 sq ft and 100,000 sq ft units that will be available in 2021. Similarly, Trebor Developments are progressing the speculative development of 46,000 sq ft at Junction 35, Pencoed and Border Group completed the construction of 50,000 sq. ft. in Crumlin, Caerphilly that has since been let to Orange Box.
Neil Francis commented:
“In addition, development of smaller workshop and business units of up to 1,500 sq ft has been continuous. This type of development is typically built in phases and on sites of between 1 and 2 acres. The design and layout of these units centres on occupiers who do not require large amount of circulation and deep loading yards. The main source of demand for this product is local companies that want to own their own property, and sustained demand is driving up capital values.
“Many developers though have chosen to retain an interest and units of this type have let well when offered to market. For example, in a development close to Junction 32, six units of between 1,000 sq ft and 1,500 sq ft were constructed. Five of the units let before practical completion at a headline rent of £10 per sq ft, with occupiers keen to understand the actual monthly running costs, which is more important to them as they grow their business. The rent at this development reflected the quality of the product on offer, its proximity to the M4 motorway and the flexibility of the space allowing for specific tenant fit out.”