Industrial rents keep rising

UK industrial and logistics rents continued to increase throughout 2016 owing to constrained supply and strong levels of demand from online retailers such as Amazon. According to Colliers International’s latest Industrial Rents Map, average prime rents for distribution product increased by 3.3% and 3.9% for multi-lets year-on-year, with Park Royal, NW10, establishing a new record rent at £17.25 per sq ft. Colliers forecasts average industrial rents will rise by 2.2% annually until 2020, making industrial property the strongest growing commercial property asset class. Len Rosso, head of industrial and logistics at Colliers, said: “Despite economic uncertainties, constrained supply and strong levels of take-up in the UK industrial property sector are ensuring that it continues to perform better than any other major property asset class in terms of both rental growth and yield impact.” Senior research analyst Bo Glowacz added: “Following an uptick 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 assets of more than 100,000 sq ft rose across most of the UK in 2016 by an average of 3.3% to £6.31 per sq ft, demonstrating a return to pre-recession levels. Heathrow remains the most expensive place to rent a distribution facility in the UK, with average rents reaching £15.50 per sq ft. Rosso said: “Due to the constrained accommodation available, we have 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.” A shortage in supply of prime “small sheds” is forcing up rents across the UK. Average rents increased by 3.9% in 2016 to £8.57 per sq ft. The highest prime rent was established at the Quad, Park Royal, achieving rents ranging from £16.75 to £17.25 per sq ft. Average UK industrial land values rose by 19% year-on-year to £549,000 per acre for lot sizes of 10 acres or more. Average land values for sites smaller than five acres increased by 3.1% to £863,000 per acre. West London – including Heathrow, Park Royal and Staples Corner, Acton and Poyle – currently achieves the highest land values for industrial property, averaging circa £2.5m per acre for plots of less than five acres. • To send feedback, e-mail amber.rolt@estatesgazette.com or tweet @amberrolt or @estatesgazette