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The economic recovery helped industrial properties in the UK’s Midlands pick up in 2014, the latest regional analysis shows. Last year saw a 17.6% increase in sales volumes on industrial properties of more than 100,000 square feet, according to the Birmingham office of global real estate adviser Cushman & Wakefield. Total take up in 2014 of the region’s 100,000 square feet plus properties was 8.79 million square feet of space, which was slightly up on 2013’s 8.63 million square feet, itself the best year for transactions since 2008. In addition, 2014 saw an increase in demand for industrial properties across the board, with the volume of enquiries increasing by 5.5%compared to 2013 and the overall space required increasing by 10%. ‘The improvement in total take-up, volume of enquiries and overall space required witnessed in 2014 is a clear indication that confidence continues to grow in the industrial sector amongst occupiers,’ said David Binks, industrial partner at Cushman & Wakefield in Birmingham. ‘The improving economic conditions continue to encourage business growth leading to increased demand to accommodate both expansion and relocation requirements,’ he added. He explained that the increase in demand had exacerbated the long standing problem in the Midlands of the lack of availability of grade A space. As a result, occupiers found that in 2014 there was less choice available, with some forced between opting to wait for existing buildings or speculative developments or entering the design and build market. For those unable to wait for buildings to be constructed, and with grade B space being limited as well, the only option left was to look at grade C space. Binks said in 2014 many firms opted to go down this route as a temporary solution, particularly those with fixed term contracts to fulfil in sectors such as automotive and distribution. This helped boost take-up of grade C industrial space during the year, with 16 transactions of buildings of more than 100,000 square feet totalling 3.65 million square feet being completed, compared to 2013 where three transactions were completed totalling 830,000 square feet. Take up of similar sized grade B space was less, at 2.14 million square feet compared to 2013 which was 2.62 million square feet, although this reduction is a function of the limited supply of facilities available of this quality. ‘We believe the increase in grade C take up is reflective of occupiers requiring immediate occupation of buildings on three to five year term certain deals, rather than better quality buildings where longer lease terms would be required. This is especially the case for third party logistics companies, where contract lengths tend to be three and five years, and more lease flexibility is important,’ Binks pointed out. ‘The shift in demand for grade C space in 2014 over grade B is reflective of a greater quantity of take up in of the latter in 2013, which significantly reduced stock levels. Essentially the market has continued to polarise, if an occupier wanted to take… Continue reading →
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