Southampton: LSH warns of premium space shortage in logistics sector

Commercial property specialist Lambert Smith Hampton has reported a record year in the logistics sector – but warns of a shortage of high-quality space to meet demand in the region.

LSH’s annual report for 2016 shows that a total of 1,888,705 sq ft of logistics space – used for warehousing, storage and distribution – was transacted in the south. However, less than a quarter of that was classified as prime Grade A space – which represents the newest and highest-quality buildings in the market.

LSH’s Southampton-based specialists, who handled more than half of all the logistics real-estate transactions in the region last year, warn that increasing optimism in the market could potentially be held back by a shortage of premium space.

The firm, which has offices in Southampton and Fareham, last year handled 990,000 sq ft of space out of a total take-up in the region of 1,888,705 sq ft.

Jerry Vigus, director of capital markets and industrial & logistics at LSH in the south, said: “2016 yet again highlights the strength of the industrial and logistic sector within the commercial property market.

“There are lots of positives for us to take from these figures and we are delighted to be at the forefront of this increased activity in the region.

"While there is certainly a wave of confidence in the logistics market, that optimism is threatened by a shortage of high-quality space.

“The sector continues to see a shortage of supply of prime space. The significant increase in prime rents reflects this shortage, with occupiers facing prime rents at £9.50 per sq ft.

“The good news is that several key large developments, such as South Central, Alpha Park and Dunsbury Park, will go some way to appeasing demand from occupiers.

“One particular trend we are seeing in the south is a lack of smaller units in the middle section of the market and we predict there will be further development of new multi-let estates to meet this demand.”

Several key speculative developments in the region reflect growing confidence in the logistics sector.

The £30 million South Central scheme at Test Lane, Nursling, where LSH is the joint letting agent, comprises of three industrial units, totalling 250,000 sq ft, suited for distribution and logistics purposes. It is set to create an estimated 750 jobs.

Bericote and Blackrock are already on the Alpha Park site in Chandler's Ford – which LSH is acting as agent for – to develop approximately 150,000 sq ft, with steel frames going up this month.

And, at Dunsbury Park, Havant, there is outline planning consent for more than 600,000 sq ft of space for industrial and storage use.

In Portsmouth, Canmoor and BA Pension Fund are due on site shortly to speculatively develop a much-needed multi-let estate at Merlin Park with units from 7,000 sq ft to 20,000 sq ft.

The regional picture is echoed in the national market. There was a record year of activity in the logistics sector, with a take up of 37,300,000 sq ft – surpassing 2014’s previous high by 6%.

Amazon was stand-out occupier accounting for 20% of the logistic take-up – a record share by a single occupier.