The North West industrial market faces a severe shortage of Grade A stock by the end of 2016 despite the 2.2 million sq ft of new space due to be delivered across 11 schemes this year, according to international real estate advisor Savills.
The firm reports that, although the North West has the second largest development pipeline of any UK region, it will not be enough to absorb even the average annual take up of 3.44 million sq ft. This follows a record-breaking 2015 in which industrial take-up in the North West reached an all time high of 4.56 million sq ft.
Stuart Murray, industrial director at Savills, said: “Speculative development is very much on the agenda in the North West, with major schemes including Harbert’s H1 and H2 units at Heywood Distribution Park and 360 at Logistics North, Bolton due to complete in the next few months. However, if average take up continues there simply won’t be sufficient supply even given the healthy development pipeline. The big questions now are where will the second tranche of new stock come from and who will the developers be?”
Although the current supply of industrial stock in the North West appears relatively robust at 5.71 million sq ft, Savills says 81 per cent of this is classified as Grade B or C with much of the latter unsuitable for occupation. Already the shortage of Grade A space is driving a sharp rise in occupier demand for bespoke units, with build-to-suit deals accounting for 48 per cent of take up in 2015 compared to 18 per cent in 2014.
Kevin Mofid, industrial research director at Savills, added: “The industrial market has shown significant growth over the past 18 months, with prime rents in Manchester increasing by almost 20 per cent from £5.50 per sq ft to £6.50 per sq ft. A combination of constrained supply and increasing build costs have also driven the freehold value of industrial land up considerably and we expect this to continue throughout 2016.”