More industrial space is needed when tolls axed
ALEADING logistics expert has called for speculative industrial development in Wales to ensure that new demand created by scrapping the Severn crossing tolls is not constrained by a recent decline in space.
Latest data from global real estate advisor Colliers International shows that available industrial space in Wales has suffered a sharp drop in less than a decade, falling from 4.9 years in 2009 to 2.1 years in 2017.
Tim Davies, Head of Industrial & Logistics in Wales for Colliers International, said the 57% decrease showed there is a need for logistics developers to build speculatively in Wales to address the severe shortage of industrial space – particularly following the announcement from the Government that tolls on the Severn crossings would be scrapped at the end of 2018.
Mr Davies added: “Tolls on the Severn Bridges being removed is likely to increase demand from occupiers who have previously been deterred by the prohibitive bridge crossing costs,” he said. “However, this demand will be coming in the wake of a dramatic reduction in available industrial space in Wales in recent years. If this situation is not addressed it will constrain potential business growth at a pivotal time. This represents an opportunity for logistics developers to build speculatively in Wales.”
Mr Davies added that UK industrial availability had fallen on average 62 per cent since 2009, and that industrial supply is likely to fall further due to continued demand from e-tailers, lower levels of speculative starts, and the loss of industrial commercial land for other uses such as residential.
The Colliers International Summer 2017 UK Industrial & Logistics Market Barometer shows (for the UK) that despite the reduction in availability and supply, just 17 million sq ft of industrial space is under construction.
There has been a 60% decline in speculative completions since 2007, according to the data, with speculative industrial schemes now accounting for just 28% of all UK developments under construction. Colliers predicts that completions will fall by 60 per cent in 2017, to 3.5 million sq ft.
The data also shows that industrial sector continues to attract strong investor interest, with investor volumes of £3.4bn in the first half of 2017, exceeding the first half of 2016 by 13%.
“Following the outcome of the European referendum, there has been stronger demand for industrial space from the manufacturing sector due to the weakening value of sterling encouraging a surge in demand for British goods,” said Bo Glowacz, senior Research analyst, research and forecasting at Colliers International. “The sector now accounts for 27% of the market, up from 19% in 2016; second only to retailers and wholesalers who account for 33% of demand.”