Philip Woolner, joint Managing Partner at Cheffins provides an update on the local industrial market.
"For the past 12 months the industrial market has been characterised by a lack of stock, both in inner city locations and out of town business parks. This has led to rising rental costs and capital values throughout the sector as well as take-up across the Oxbridge corridor currently sitting at above average levels. Headline rents for new-build industrial units over 5,000 sq ft are now in the order of £8.50 - £12.50 per sq ft as evidenced by lettings during the second half of 2018 at Cambridge Research Park and Newmarket Business Park. At the latter, Cheffins completed three large lettings totalling over 70,000 sq ft at rents between £8.75 and £10 per sq ft, which resulted in the park now being fully-complete following over 15 years of expansion.
Much of the demand is fuelled by the boom in online shopping which has amplified the increased importance of well-located and specified warehousing and led to continued investment in industrial estates from institutions, property companies and private individuals. Investment yields on good quality industrial stock is now at around the 5 per cent mark which is lower than the average prime retail yield, therefore bucking the trend on previous investments. In addition to e-retailers, demand has come from a range of occupiers including mid-tech companies, consumer brands and manufacturing businesses. This has been demonstrated by the range of occupiers now in place at Newmarket Business Park where occupiers include Wickes, Ridgeons, Taylor Wimpey Plc, Smiths News Plc and Cosentino UK Ltd. Similarly, Lancaster Way near Ely now has over 80 companies in occupation across 1 million square foot of industrial and R&D space.
We have forecast that there is likely to be an increased focus placed on smaller, regional-sized warehouses in strategic locations over the next couple of years in order to serve demand for online shopping, logistics and storage. As an example, planning permission has just been applied for for two phases of development at Bourn Quarter, a new 25-acre industrial site just outside of Cambridge, owned by the Diageo pension fund and to be developed by Aitchison. Once complete, this development will comprise up to 350,000 sq ft of prime industrial space which will be much-needed locally. Brexit and its potential impact on import and export could also lead to further demand for warehousing in key locations, such as the East Coast Ports and is likely to have a generally positive impact on the logistics market."