UK industrial and logistics rents continued to increase throughout 2016 due to constrained supply and strong levels of demand from online retailers such as Amazon, according to Colliers International’s latest Industrial Rents Map.
The map shows that the average prime rents for distribution product increased by 3.3 per cent and 3.9 per cent for multi-lets year on year, with Park Royal establishing a new record rent at £17.25 per sq ft. Colliers International forecasts average industrial rents to further rise by 2.2 per cent annually until 2020.
Bo Glowacz, senior research analyst at Colliers International said: “Following an uptake in speculative developments in 2016, we are unlikely to see a large amount of potential space entering the industrial market in the short term. This will further restrict supply going into 2017 and ensure that rents will maintain their upward trajectory.”
Prime headline rents for ‘big sheds’ rose across most of the UK in 2016 by an average of 3.3 per cent (to £6.31 per sq ft), demonstrating a return to pre-recessionary levels.
Len Rosso Head of Industrial and Logistics at Colliers International said: “Swindon has seen the biggest surge in rental changes between 2015-16, with a 20 per cent increase. Strong demand for units over 100,000 sq ft in Swindon in the last five years have now resulted in very limited options for the best distribution product. With rents achieving £5.65 in South Marston Business Park, good quality stock is set to reach rents of £6.00 per sq ft. Other locations, such as Basildon and Dagenham, have also seen strong rental growth (14.3 per cent and 12.5 per cent respectively) supported by recent demand for space at Logistics Centre at London Gateway, while Dagenham’s rent for distribution space was led by Coca-Cola’s recent lease at Logic 233. Amazon and Lidl’s continued investment in Doncaster has led to the area flourishing as an industrial ‘hub’, as has the iPort development, leading to a 10 per cent increase in Y-O-Y rents.
“Due to the constrained accommodation available, we’ve started to see small and medium sized warehouses operating closer to town centres, and as a consequence, the market has become more competitive. The likes of Amazon and ASOS are now acquiring satellite and ‘hub’ units closer to consumers in order to meet delivery times.”
Heathrow remains the most expensive place to rent a distribution facility in the UK with average rents reaching £15.50 per sq ft.
The average land values for UK industrial rose by 19 per cent year on year (to £549,000 per acre) for lot sizes of 10 acres and above. Average land values for sites smaller than five acres increased by 3.1 per cent (to £863,000 per acre).
Land values in West London, including Heathrow, Park Royal and Staples Corner, Acton and Poyle currently achieve the highest land values for industrial property, with the average values set at circa £2,500,000 per acre (for less than five acre lots).