The well-publicised shortage of Grade A units has been a key factor in the industrial property market in Wales over the past five years.
But the lack of available Grade A industrial property has been exacerbated by the surge in demand for larger units following the Covid pandemic, property consultancy Knight Frank has said.
It's a problem which has accelerated dramatically in the last two years, due to the Covid-driven switch to online retailing which has led to companies wanting larger units for warehousing and distribution for e-commerce.
Research conducted by the property consultancy showed that availability of units over 50,000 sq ft now stands below three million sq ft, the lowest in years, said Neil Francis, head of logistics and industrial division at Knight Frank’s in Cardiff.
Mr Francis said: “With so much of the good quality premises taken up in recent years and not replaced, much of this larger space is of relatively poor quality and no longer meets modern occupier requirements.
“The Covid-driven surge in online retailing cannot be denied and this led to national occupiers moving to Wales and urgently wanting new, bespoke industrial property.”
He added: “Meanwhile large numbers of existing manufacturing occupiers in South Wales have been keen to move to more efficient properties, having expanded as far as they can in ageing buildings and appreciating the benefits a new building brings.”
Earlier this year, Knight Frank saw a record take up of industrial property in Wales in 2021, reporting that 1.84m sq ft of industrial units of 50,000 sq ft and over were transacted in Q4.
The Cardiff office achieved its highest ever turnover for industrial property transactions in the year ending March 2022 due to this demand for units in the market.
However, the shortage is now encouraging national developers to enter Wales’ industrial market.
St Modwen built two new units in the second phase of its St Modwen Park development in Newport, leasing 31,000 sq ft to Mitel and 100,000 sq ft to Genpower within months of their completion.
The headline leasing transaction with Genpower saw it agree to a 10-year lease at a rent of £6.25 per sq ft to form the heart of the company’s distribution network, creating 25 additional jobs.
St Modwen is now developing four more units from 17,000 sq ft to 44,000 sq ft in the next phase, with further planning secured for three units between 52,000 sq ft and 119,000 sq ft.
Birmingham-based Trebor Developments, with joint venture partner Maple Grove Developments, has received detailed planning consent for a new speculative industrial scheme of 46,100 sq ft on Pencoed Technology Park, Bridgend, off Junction 35 of the M4 motorway.
The single unit of 46,242 sq ft will commence on site in May for occupation in Q1 of 2023 and is suitable for a range of uses. Andrew Scott Limited has been appointed main contractor with construction due to commence in April.
Knight Frank said there are good early levels of interest in the unit.
Bob Tattrie, managing partner at Trebor Developments, said: “It has taken a long period to acquire this site and finalise the grant funding, but we are now ready to deliver and the site location is excellent, being part way between Swansea and Cardiff.”
He added: “We remain very active in the South Wales market and this latest speculative industrial unit is one of very few such developments being delivered in 2022-2023. We expect strong occupier interest.”
Cubex acquired a 9.5 acre site earlier this year, directly adjacent to the M4 in Magor, Monmouthshire.
The real estate developer is seeking planning permission to develop a Grade A 160,000 sq ft logistics unit, already rumoured to be under offer.
Cubex are close to acquiring four acres in East Cardiff where it will have the ability to offer up to 65,000 sq ft.
Other proposed development schemes include Colliery Business Park, a new development by Virtuous Circle Development of industrial, warehousing and urban logistics units in the Llantrisant area.
While London Metric, another newcomer in Wales’ industrial property market, is undertaking the 33,000 sq ft Axis 32 warehouse at Junction 32 of the M4.
Mr Francis said: “These are all positive signs for the industrial market in Wales and I am optimistic that once we have a few more spades in the ground, and the higher headline rents now being achieved become the norm, it will give many other developers greater confidence to enter the region.”
“While most of these developments are inevitably located close to the M4 motorway, it is good to see the Welsh Government taking a strategic approach to attracting industrial users across the region.”
He added: “They are progressing with plans to develop a new 50,000 sq ft unit at the 36 acre Rhyd y Blew industrial site in Ebbw Vale. Construction work will begin later this year and the unit will be available to let in 2023. This will hopefully provide confidence for further developments in areas accessed by the A470 and A465 Heads of the Valleys roads.”
