The supply of quality new commercial property is dwindling in the Midlands with the market now dominated by second hand stock, according to a new report.
Sustained up-take in the logistics sector in the first half of the year has put pressure on a dwindling amount of available space, according to CBRE’s latest UK Logistics Marketview.
In the West Midlands take-up of new and secondhand units of more than 100,000 sq ft, between January and June, totalled just under one million sq ft.
Of this, new logistics units made up 680,000 sq ft, with secondhand space in the region accounting for 220,00 sq ft.
“There was a spike of occupier activity during the first six months of the year, which is a good sign that the logistics market remains strong, with continued demand in the recognised core distribution locations,” said Richard Meering, senior director in the industrial agency team at CBRE in Birmingham.
“However, the supply of existing quality new stock is rapidly running out and this will cause problems for some occupiers.
“New space continues to decline, falling 22 per cent since the start of the year.
“In contrast, the amount of secondhand stock has continued to increase, rising by 30 per cent to 5.6 million sq ft, resulting in the market now being dominated by secondhand space.
“Whilst functional and perhaps offering fit out, a lot of these buildings will not necessarily offer the preferred specification occupiers are looking for.”
According to the CBRE report, of transactions completed in the first half of the year, the majority were under 200,000 sq ft.
There were no deals over 500,000 sq ft in the Midlands in the past 12 months.
And with a number of buildings currently under offer also in the sub-200,000 sq ft bracket, the trend is expected to continue during the second half of the year.
Mr Meering added: “What we are seeing in terms of the size of deals is ultimately a reflection of the current availability, with buildings between 100 – 200,000 sq ft accounting for almost three million sq ft of the total supply.”
BMW’s announcement of investment in its Hams Hall factory and Jaguar Land Rover’s commitment of millions of pounds of investment in its regional operations is “all good news for the logistics sector, but we need the available stock,” Mr Meering said.
“There are now significant gaps in available quality units across the region, particularly from Birmingham down to Rugby within the ‘Golden Triangle’, and occupiers are having to increasingly focus on ‘oven ready’ development sites where infrastructure is in place and buildings can be procured within 12 to 15 months,” he said.
“However, the number of sites that can offer this are very limited.
“We are starting to see the first quality development sites coming to the market, which are generating strong interest.
“Best bids have been secured on development sites at Milton Ham, Northampton, Ryton in Coventry and Rugby Gateway, all of which offer excellent immediate development potential.
“For developers and landlords, the pendulum has definitely swung in their favour as they are now able to secure strong returns.”
CBRE is the world’s largest commercial property services firm in terms of 2011 revenue.