While the Thames Valley industrial market has been relatively slow over the past few years with limited take-up across the area, the market has held its own with headline rents remaining fairly constant, creating a positive feeling for the coming period with some growth anticipated by the end of the year.
The small number of new schemes developed has helped to redress the balance between vacancy and take-up, and as a result rents are remaining steady. In the past year there has been a marked increase in the development of smaller sized units of 186-744sq m that have been built speculatively and are available freehold. Low interest rates have helped fuel the popularity of these units particularly with owner-occupiers looking to hold the premises as attractive alternatives to traditional pension policies.
On the development front, as a result of the office market’s dominance of take-up in recent years, there has been limited consented land for the industrial and distribution sectors – a position that is unlikely to change in the short to medium term. Nevertheless there are some important schemes in the pipeline, of which the majority is speculative.
Speculative schemes in the area that are completed and awaiting occupiers include; Gazeley and British Land’s Mill Park, in Thatcham, a 23,715sq m unit completed in July 2004 and available at a quoting rent of £7.75 per sq ft and Reading Approach, the Chancerygate/ Morley’s scheme, which was completed in December 2004, totalling 10,230sq m, with rents of £10 per sq ft being quoted for units of between 716sq m and 2,790sq m.
Further down the line, the Chancerygate site in Wokingham will provide 3,634sq m of accommodation in units from 307-706sq m with practical completion expected this month. Standard Life is currently refurbishing approximately 7,440sq m of accommodation at Suttons Business Park.
There are also a number of identified sites, particularly in the Heathrow and Hayes area, such as Brixton’s Polar Park at Heathrow with consent for a single unit of 27,900sq m; Matador, a joint venture by Chancerygate and Clerical Medical in Hayes for a facility up to 13,020sq m and the ProLogis site in Hayes which is currently awaiting planning for the a development of up to 49,755sq m. In addition, at Greenham Park near Newbury, Sainsbury’s are is looking to dispose of a 33-acre site and is rumoured to have a short list of preferred developers.
Looking to rents, the market has held its own over the past 12 months, with headline rents in key areas such as Heathrow (£10-12 per sq ft), Reading (£8-9 per sq ft) and Basingstoke (£6-8 per sq ft) remaining fairly static.
Over the next year we expect that rental levels will start to improve and incentives will start to reduce as a result of headline rents being pressurised up by inflation on build costs and the relatively high land values that developers are paying for sites. n
Liz Dunsmore is with Strutt & Parker’s Investment Department.
Tel: 0207 629 7282.