Goadsby Regional Market Comment: Positive outlook for South Coast industrial sector6th June 2012

It would be fair to say that most businesses and individuals recognise that these are challenging conditions we find ourselves in and trying to grow business is tough. The difficulties in the Eurozone have caused sterling to strengthen against the Euro, with £1 reaching €1.20 for the first time in three and a half years. However, this upward trend hinders export sales by UK manufacturers to Europe. Other markets need to take up the slack and exports to the US and Asia are important to our local businesses.

The good news is that we are unlikely to see Euro exchange rates return to pre-recession levels so UK manufacturers should maintain a level of competitiveness. Another positive shift for UK manufacturing is the cost of labour in Asian markets, with China’s labour costs increasing due to its soaring inflation. This could help to bring manufacturing back to the UK especially for higher value products. These factors are giving optimism to SME’s of an increase in orders for the second half of 2012 and this should see an increase in demand for industrial space.

Supply also continues to be constrained by a lack of new development despite businesses needing more space in our region. In Southampton for example, Chancerygate Business Centre, one of the few new industrial schemes along the Solent Corridor has nearly 80% of its units now sold or let. Southampton Trade Park is now fully occupied and City Industrial Park has over 90% occupancy. For businesses wanting small units in the city there is very little choice available.

In the next 12 months, this could give rise to some speculative development, especially for smaller units of up to 5,000 sq ft. A speculative scheme of six small units recently completed at Belbins Business Park in Romsey saw the first unit let almost before the cement was dry with high levels of interest being experienced for the remaining units. Quoting rents are £9.75 per square foot for 1,410 sq ft units. For larger units in excess of 20,000 sq ft, pre-lets are the order of the day with a number of deals being agreed in 2012 and with more likely to follow. There is also demand from businesses to purchase property and with prices for existing stock well below the pre-recession levels, this may well prove to be an astute move for businesses.