Dr Jekyll and Mr Hyde

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One would be forgiven for getting a tad confused lately. On the one hand there has never been so much warehouse space available and on the other there is nothing suitable for love nor money.

This schizophrenic state of affairs must make forward planning, even without severe financial constraints, a problem of nightmarish proportions.

Even the property agents are finding it hard to make sense of it all. In its latest UK Industrial Research report the best Jones Lang LaSalle can come up with is patchy while BNP Paribas prefers polarised.

But there is one thing that is very clear looking for the right space is going to be tough. A recent phone call from a charity looking for 30,000 sq ft of space brought the problem home. The building they are in costs too much to run and dilapidations are just too onerous to even contemplate. The only option is to take advantage of a lease break and go for something else. Problem is, while there is oodles of space to be had, is it any better than what they have got? There’s no point jumping from the frying pan into the fire.

“But surely you know of space just waiting to be occupied?” asked the exasperated MD. “Aren’t there loads of landlords just longing for occupiers to settle in so they can at least mitigate empty rates bills?”

Well yes there are, but will it be the right space?

As BNP Paribas points out the national supply of available industrial and logistics property fell during the first quarter of 2012, the first decrease in supply since the second quarter of 2010. OK it wasn’t a massive fall, only 1.1 million sq ft but with 84 per cent of all available space classed as second hand it is all the more scary.

Kevin Mofid, an associate director at BNP Paribas Real Estate, says: “The fall in the supply figures has been on the horizon for some time as we have been witnessing an increasing polarisation of the market with the availability of brand new stock dwindling. As occupiers are being left with few opportunities to acquire new space the supply of better quality second hand stock is also falling.”

Jones Lang LaSalle notes that take up is down but not because there isn’t the demand, rather the reduction in take-up is partly attributable to a lack of quality choice in some markets, with some companies putting off decisions to take space rather than take poor quality stock.

At the end of March 2012 only 14 per cent of available space was in new or refurbished units while at May 2012 speculative industrial development under construction stood at around 793,000 sq ft across the UK.

Liza Helps
Contributing Editor Property

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