South Coast: Industrial unit rents rise on back of supply shortages

Leading commercial property specialists at Lambert Smith Hampton expect rent rates for mid-box (30,000-50,000 sq ft) new industrial units on the South Coast to exceed £10 per sq ft in 2018 as demand continues to outstrip supply.

The rate of rent per sq ft, seen by landlords and occupiers alike as a market barometer, has been steadily increasing amid a continued squeeze on desirable units larger than 10,000 sq ft along the M27 and M3 corridor.

Adrian Whitfield, industrial & logistics director for LSH’s South Coast offices, said: “We know that historically, rent rises along the M27 consistently track those further towards London in Basingstoke, Farnborough, Bracknell, Woking and around the M25. At the upper end of the M3 and on the M4 closer to London we are already seeing rents of £11.50 to £13.50 per sq ft achieved on new schemes.

“We won’t get near to those rates yet, but a lack of supply in the South East combined with the amount of land being used for residential rather than employment purposes is clearly having an effect, as seen in the level of demand at new developments on the South Coast, where units built speculatively have been quickly snapped up by occupiers desperately in need of prime space.

“We’ve seen in 2017 that rates at new developments, such as Alpha Park and Mountpark in Southampton, and Pioneer Park in Portsmouth, are well established at between £8 to £9.50 per sq ft, and these figures have consistently risen over the past decade from £7.25 per sq ft on a Design & Build basis, an increase of over 30%.

“Industrial and warehouse units that have potential for high value alternative use, such as trade counter, showroom or leisure use, have been fetching £12 to £15 per sq ft for some time now and it has been fairly normal recently to quote annual rents of £10 or more per sq ft for properties of under 5,000 sq ft in the South Coast region. Rates for mid box units have not quite reached that level yet, but if the current market conditions prevail, we can anticipate double digit rates for these units as being on the horizon sooner rather than later.”

The prediction comes in the wake of Lambert Smith Hampton’s latest South Coast Industrial Market Pulse report, covering the third quarter of 2017, which highlighted a rise in the take-up of prime industrial property and a strong market despite the uncertainties of the ongoing Brexit negotiations.