40% increase in South West industrial take-up with Bristol and Gloucester performing strongly

Alder King Marketing Monitor

Take-up in the South West industrial/logistics property market is up 40% on this time two years ago, defying the challenges posed by the pandemic, say property consultants Alder King.

The firm’s latest report Market Monitor H1 2021 shows total take-up in nine key South West locations increased from 2.09 million sq ft at the half-year point in 2019 to 2.94 million sq ft at the same point this year.

Take-up was strongest in Bristol, Exeter, Gloucester, Plymouth and Truro, with Bristol recording 1.45 million sq ft* of take-up in H1, 122% up on the same period in 2019.  Gloucester also performed strongly, recording 440,000 sq ft of take-up, up 76% from 250,000 sq ft in 2019.

Activity in the sector is being driven primarily by demand from distribution and logistics operators seeking to improve and expand the efficiency of their delivery networks.  Prominent transactions so far this year include Amazon’s acquisitions in Bristol and Gloucester and Wayfair and Travis Perkins’ acquisitions in Bristol.

To help meet continuing demand, new industrial developments are underway in Bristol, Exeter and Gloucester, led by developers including St Modwen, Trebor, Canmoor, Panattoni, Chancerygate, Rockhaven, GPG Developments and Baylis Estates.

The strength of the sector has led to supply shortages and rental and capital growth in the first half of the year, and further increases are expected in the second half.

Many office occupiers are still developing their plans for a hybrid style of office based and remote working.  The developing trend is for less but better specified accommodation which will likely see more surplus ‘grey space’ being released into the market over the next 18 months.  To date this has been at a sustainable level, with no downward impact on rents.  In fact headline rents have increased in Bath and Cardiff.

H1 office take-up in Bristol was circa 315,000 sq ft, boosted by the BBC’s acquisition of 60,251 sq ft in Bridgewater House, Finzels Reach.  With several sizeable transactions currently in solicitors’ hands and improving enquiry levels, the year end figures will be encouragingly strong.

Other market corrections are being delayed by ongoing government support.  Change in the retail, leisure and hospitality sectors is creating some distress but also plenty of opportunity.

The repurposing of large retail premises is now underway, with a number of former Debenhams stores being sold for alternative uses.  The sale of the Gloucester store to the University of Gloucestershire earlier this year for educational and some commercial/student accommodation use is a prime example.

There is also strong demand at the smaller end of the retail and leisure markets, led by a new breed of independent operators which is already bringing greater variety and experiences to our towns and cities.

Simon Price, head of agency at Alder King, said: “The industrial sector is exceeding its pre-pandemic performance and, encouragingly, there are signs that the office and retail/leisure markets are returning to more normal levels of activity.

“Many businesses have shown incredible resilience over the last 18 months, and have successfully executed expansion plans in the midst of lockdown. The overall picture is also being boosted by the high level of new start-up businesses. We are optimistic that the second half of the year will prove equally successful.

“Supporting the premise of ‘building back better’, we are seeing unprecedented occupier and investor focus on sustainability and carbon neutrality.  There are, however, macro concerns around the increasing cost and availability of building materials and labour shortages which could slow down the delivery of new and refurbished stock into the market.”

Market Monitor H1 2021 examines the office, industrial/logistics and retail/leisure markets in 10 key centres across South West England and South Wales.

*Courtesy of South West Industrial Agents Society.