Industrial property market in South Wales continues to improve16th January 2014

The South Wales industrial property market continued to improve during the second half of 2013, with transactions for units larger than 50,000 sq ft totalling around 800,000 sq ft, according to the latest research from Knight Frank.

Neil Francis, Head of Industrial for Knight Frank, Cardiff said: ”After an uncertain start to 2013 it is positive to witness a number of deals within the market and while the first half of the year was largely dominated by freehold purchases, the second six months witnessed an increase in the number of lettings achieved.”

“Enquiries for units of over 50,000 sq ft increased dramatically in the second half of the year and it is pleasing to see that the majority of active requirements are for South Wales based occupiers looking to grow and expand within the area. Generally, these requirements are still focused on the M4 Corridor, but there are also signs of increased actively within Rhondda Cynon Taff and the Heads of the Valleys, where in some situations properties that have been vacant for a significant time are now attracting interest from more than one occupier.”

Francis believes that the continued lack of Grade A space and no sign of speculative development for larger units mean occupiers are still focusing on purchasing second hand accommodation at competitive prices. “This allows them to refurbish and in some circumstances demolish sections - such as at 3663 at Newhouse Farm, Chepstow and at G24i at Imperial Park, Newport for example.” 

“While prime headline rents have broadly remained stable, the lack of Grade A space has resulted in rent-free incentives hardening for such stock. This change in market deals has resulted in significantly increased demand within the industrial investment market with a wider cross section of purchasers looking further afield in order to secure good secondary property with more attractive yield profiles.

“During this time we have seen some significant transactions with a private investor acquiring the 250,000 sq ft Tesco Distribution in Gwent Euro Park, Magor for £16,155,000, reflecting a Net Initial Yield of 9%.

“In addition we have seen the return of the institutional investors to the industrial sector in South Wales with Threadneedle acquiring Bridgend Industrial Estate, one of South Wales’ largest and more established business locations.”

Looking forward to 2014, Neil Francis said: “At units on the market such as the 177,000 sq ft Wentloog Environment Centre, the 166,500 sq ft Merthyr Distribution Centre, and the 335,000 sq ft Ardgh Packaging, the agents involved are reporting strong interest so the beginning of 2014 should witness some significant transactions.”

There are also more enquiries being received with specific requirements such as minimum 10m height, a large number of dock levellers, or cross docking. “With limited stock within the region offering these facilities, many of these occupiers will start to consider new build and realise there is an increased rent or capital value to make development viable.” .

“Developers with vacant sites in strategic locations will therefore start to prepare their sites for development so they can respond quickly to any new build requirements. Examples include St Modwen at Llanwern, Newport and Robert Hitchins at Bridgend Industrial Estate who have plans drawn to provide up to 300,000 sq ft of new space, which could feasibly be ready for occupation by the end of this year.”