South Yorkshire outstripped the rest of the UK in the second half of last year when it came to letting existing industrial property, according to a new research report from Knight Frank.
The property consultants’ latest LOGIC report says there was “unprecedented large unit take-up” as potential occupiers turned to the region.
Sheffield office partner Rebecca Schofield said: “The results for the second half of 2013 showed South Yorkshire performing well for take up of larger units.
“This is primarily due to the available supply of larger units compared to other regions in the UK, which has focussed occupiers attention to the area.
“There is now significant pressure on industrial unit supply across the region. The situation is arguably most acute with regard to small to medium sized units, typically sub 25,000 sq ft.”
Rebecca Schofield says the fall in supply has yet to result in headline rental growth, but increasing lack of choice has prompted the scaling downs of incentive for potential occupiers during the last six months.
Knight Frank’s LOGIC report shows demand for industrial property in the region improved markedly among property investors during the second half of 2013.
Rebecca Schofield says there is now solid demand from funds and property companies for multi-let industrial estates and strong demand for well-let larger units, particularly from overseas investors.
The LOGIC report highlights parcel distribution as a continuing key source of demand, with occupiers adjusting to accommodate the rapid growth in e-commerce, which is having a positive effect on the packaging sector.
Manufacturing also remains active and the Advanced Manufacturing Park in Rotherham continues to expand, with encouraging knock-on effects for the region, attracting further inward investment and supply chain occupiers.
Rebecca Schofield says there are a number of business parks with outline consent which are ready for development, including 50 acres within phase two of Sheffield Business Park, with outline consent for 900,000 sq ft of development, and Smithywood Business Park at Junction 35 of the M1, with 25 acres.
Local developers are also proposing a number of small unit schemes, such as First Point in Doncaster and Rotherham’s Vantage Park, although speculative development is subject to grant funding.
“With existing supply limited, we expect a growing number of occupiers to seriously consider bespoke design and builds,” says Rebecca Schofield.
“However, a key barrier remains the disparity in lease terms between existing and purpose-built stock, which the market needs to adjust to. The shortage of supply also means that occupiers will find themselves having to consider longer term commitments. Should the small unit schemes that are proposed be speculatively developed, we would expect them to be well-received and hope to see some rental growth.”