SHW’s Q3 Industrial & Logistics Focus reports that the first half of 2022 continued where 2021 left off, with good occupier demand for both freehold and leasehold premises across the South East. Once again, areas reporting lower take-up than expected are due to lack of stock, rather than lack of demand.
Tim Hardwicke, SHW’s Partner and Head of Agency, comments: “This strong demand continues to be linked to logistics / B8, rather than B1 manufacturing, due to the continued need for space to serve online retailing / last mile logistics and, as a result, rents are continuing to rise in many cases between 10-20%.
“That said, due to recent external market factors, demand is starting to tail off in some locations and although we don’t predict any immediate rental re-balancing, occupiers are beginning to be more cautious, taking longer to make decisions. As a result, marketing voids are starting to extend.”
In Croydon and the surrounding areas, stock availability dropped from 1.1million reported in 2021 to 710,000 sq ft in the first half of 2022. SHW has recorded over 1.5m sq ft of demand so far this year, take up is currently at 242,000 sq ft to date, compared with a total of 430,000 sq ft across the whole of 2021. With vacancy rates standing at 5.7%, achieved new build rents are reaching just shy of £20 per sq ft, with second hand stock circa £16-17 per sq ft.
In Sutton, Epsom, Chessington and Leatherhead, take-up is at a low level so far this year at 24,500 sq ft. With 102,000 sq ft reached in 2021 there is a way to go to match these levels. Vacancy rates stand at 2.6% and with a reported 196,000 sq ft available and 670,000 of logged demand. Due to lack of stock, SHW predicts new build rents pushing through and beyond the £20 per sq ft mark.
Redhill and Reigate has seen take-up at 32,000 sq ft so far this year, up on the whole of 2021. Although logged demand remains high at 820,000 sq ft, with only 86,000 sq ft available, it’s unlikely we will reach the heady heights of 2021 (195,000 sq ft), but we may see rents increasing again from £13.95 per sq ft in 2021.
As we move into Q3, the vacancy rate in Burgess Hill and Haywards Heath has decreased further to just 1.2% (from 2.5% in 2021), with 54,992 sq ft already transacted, leaving just 27,400 sq ft available. Logged demand is high at nearly 1 million sq ft so far this year which could see rents rising again from £12.95 per sq ft in 2021. In turn, new industrial space in development, such as the 46,500 sq ft remaining available at Sussex Junction, is gathering a lot of interest from occupiers.
In Crawley and Gatwick, quoting rents remain at £16.50, with the highest rent hitting that level this year (compared with £13.75 per sq ft over the last two years). Though take up is only at 152,000 sq ft so far this year, 803,000 sq ft of existing stock remains available with demand at over 1.7 million which should see the current vacancy rate of 6.6% dropping this year. The Base in Crawley, which will provide two new highly specified units of 147,000 and 88,700 sq ft, available in September 2022, will provide the largest units for occupation in 2022.
Horsham has seen a strong level of take up so far this year at 56,000 sq ft (compared with 76,000 sq ft for the whole of 2021). However, with 450,000 sq ft of logged demand and just 18,000 sq ft available (vacancy rate of 0.9%), new industrial space is very much needed.
On the Sussex Coast, demand remains high, with availability comparatively low. Brighton and Hove has just 84,000 sq ft available (1.7% vacancy) with 1.1 million sq ft of demand. Take up is at just 10,000 sq ft so far this year. In Bognor & Chichester, the vacancy rate is even lower at 0.8%. Availability is down to 39,000 sq ft and demand is a whopping 1.68 million sq ft. However approximately 200,000 sq ft of new development is about to start at The Saltbox in Bognor.
In Eastbourne and the surrounding areas, availability is at a relatively healthy level of 241,00 sq ft. With over 1 million sq ft of logged demand, and 60,600 sq ft transacted so far this year, take up may get to near the 2021 levels (288,000 sq ft) and rents are likely to remain high (£12 per sq ft in 2021).
In Hastings, St Leonards and Bexhill, take up continues to soar, with 118,000 sq ft away already this year, compared with a total of 76,500 sq ft for the whole of 2021. This leaves only 179,000 sq ft available, with a 1.1 million sq ft of logged demand which should keep rents at around the £8 per sq ft figure. 1-9 Ivy House Lane in Hastings makes up much of the available space, offering 109,083 sq ft, which may be split depending on demand.
in Lewes, Newhaven and Peacehaven, take-up looks likely to remain at 2021 levels (35,500 sq ft), with just 15,500 sq ft transacted so far this year. SHW is reporting 380,000 sq ft of logged demand with just 105,000 sq ft available. In contrast, in Rusington & Littlehampton, take up is up by 200% already this year on 2021 figures (17,500 sq ft / 5,500 sq ft), with a very high demand of 760,000 sq ft and just 62,000 sq ft available.
The Shoreham and Lancing area has reported 17,000 sq ft of take up so far this year, following a relatively healthy take up of 54,500 sq ft in 2021. Again, low levels of stock at 84,000 sq ft are dwarfed by the high demand of 740,000 sq ft. And lastly, in Worthing take up is low so far this year at 13,500 sq ft (42,000 sq ft for whole of 2021), with 850,000 sq ft of demand and 293,000 sq ft availability, albeit 261,000 sq ft of available space is in just one building.
Tim concludes: “Despite ever increasing build costs, developers are still continuing apace with speculative newbuild schemes to meet the high demand for good quality space as overall stock remains low. New build stock must offer good sustainability credentials and landlords are taking ESG very seriously as this becomes even more of a key, driving force for occupiers wanting to lease and buy buildings.”