The take up of large industrial space in Wales declined sharply in the first half of this year, shows new research from property consultancy Knight Frank.
Deals on space for more than 50,000 sq ft in the second quarter (Q2) was just over 239,000 sq ft. This brought the total take up for the first six months to 538,900 sq ft - 48% lower than the same period last year.
Neil Francis, who heads Knight Frank’s logistics and industrial division in Cardiff, said: “It has been another challenging quarter with transaction for units over 50,000 sq ft significantly down on previous years. On the one hand, the dip in volumes reflects the shortage of high quality stock available, which is resulting in steady rental growth, but is also partly due to increasingly elongated deal timelines.
“However, the sizeable amount of space under offer provides a strong indication of the underlying strength of demand. Nearly 850,000 sq ft - some 22% of supply - was under offer at the end of June, including three units over 100,000 sq ft in size. If progressed, these deals could significantly lift take up in the second half of the year.”
Activity so far this year has been dominated by owner occupiers with four of the five transactions being freehold purchases. The largest transaction in Q2 was Euro Clad’s acquisition of their three units at Wentloog Corporate Park in Cardiff that totals around 170,000 sq ft.
Manufacturers remained the most dominant source of industrial property demand in Wales. Their 62% share of take up over the past four quarters to Q2 of this year was up from 46% in the same four quarter period last year.
Retailers also re-entered the market after being largely absent over the past year. During Q2, online catering equipment reseller Adexa Direct purchased the 75,190 sq ft unit E at Treorchy Industrial Estate, Treorchy for storage purposes.
Knight Frank’s research also show that the availability of 50,000 sq ft plus units across Wales edged up slightly in Q2, by 3.7% to 3.9 million sq ft. However, it remains 25% lower than a year ago, reflecting a broader trend of tightening supply.
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Mr Francis said: “Crucially, the entire pool of available space is second hand, and 96% of this is grade B or below. This underlines the growing mismatch between supply and the new, modern requirements of occupiers. At the larger end there are only two available units over 250,000 sq ft, one of which is under offer.”
The speculative pipeline for industrial property remains thin, with just the 55,000 sq ft unit one at Leftfield in Deeside, breaking ground in Q2, with practical completion expected in Q3 this year.
Mr Francis: “There is currently no 50,000 sq ft plus industrial speculative development activity in South Wales.
Prime industrial rents in Cardiff for units over 30,000 sq ft reached double digits in Q2, rising by 2.6% to a new headline rent at the 36,000 sq ft unit 32 at Coryton, Cardiff where FPS Distribution has taken a 15 year lease.
This rental increase represents 14.3%% growth year on year. Average rental growth of 3.3% is forecast for Wales for 2025, with 3.4 per cent expected for Cardiff.