Warehouse rents set to increase by 2.2%

According to industrial estate agents Colliers International’s latest Industrial Rents Map, UK industrial and logistics rents continued to rise throughout 2016 due to constrained supply and strong levels of demand from major online retailers such as Amazon.

The map shows that the average rents for distribution product around the UK increased by 3.3% and 3.9% for multi-lets year on year to 2016. Park Royal established a new record rent at £17.25 per square foot. Colliers International forecasts that average industrial rents will further rise by 2.2% 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.”
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