Property consultancy Knight Frank has reported a challenging start to the year for the industrial property market in Wales where there is currently a lack of grade A stock.
It said the decision not to progress with the M4 Relief Road and closures announced by both Quinn Radiators at Newport and Ford’s engine at Bridgend, in addition to the ongoing saga of Brexit, has added to uncertainty within the market.
Neil Francis, head of the firm’s industrial and logistics team in Cardiff, said: “This, coupled with a continued lack of grade A space, has resulted in just five recorded transactions for occupied industrial space over 50,000 sq ft during the first six months of the year.
“These five transactions totalled 630,000 sq ft, which is at a similar level to those recorded in H1 2018, but 50% less than the same period in 2017.”
However, the international consultancy said that unlike in recent years, these recorded transactions had been dominated by leasehold deals with the only sale being the acquisition of IP5 at Imperial Park, Newport by NHS Trust.
Mr Francis said: “This 270,000 sq ft unit was one of the last remaining grade A properties in south Wales and will be used to store and distribute fast-moving goods for hospitals and healthcare facilities across the whole of Wales.”
Knight Frank said that on the supply side there is now approximately 2.8 million sq ft available for units over 50,000 sq ft, which is 200,000 sq ft less than we reported at the end of 2018.
Mr Francis said: “The supply of grade A space will be boosted in south Wales by St Modwen’s speculative development of 30,000 sq ft and 100,000 sq ft at St Modwen Park, Newport in Llanwern and Border Group’s 58,000 sq ft in Oakdale.”
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In north Wales a joint venture between Midlands-based Trebor Developments and Maple Grove Developments has completed the purchase of a 5.3 acre site in Deeside and will now see construction three speculative industrial units, ranging from 10,000 sq ft to 50,000 sq ft on a brownfield site.
Another significant transaction, away from the occupier market, was the speculative purchase of The Box on Milland Road in Neath.
Neath Port Talbot Council acquired the 400,000 sq ft former factory from Crown Packaging early this year and, with a loan from the Welsh Government, it plans to redevelop and refurbish it to create a mix of industrial and office space close to the M4 motorway.
Mr Francis added: “In addition to the ‘Big Shed’ market, there continues to be a strong demand for new build workshop units of up to 2,000 sq ft.
“It is this sized market that has provided confidence for developers like Formaction and Dawan Developments to progress with speculative schemes on sites of one to two acres.
"Furthermore, via a property development grant backing, a number of local authorities, including Blaenau Gwent, Bridgend, Caerphilly and Rhondda Cynon Taff, are responding to this demand by progressing with their own 20,000 sq ft multi-unit developments.”
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On the outlook Mr Francis said that with a number of larger units currently under offer, and active requirements within the market, it was expected that take up in H2 2019 would follow a similar trend to 2018.
This would result in a further 1 million sq ft being transacted and provide for a similar take up level as last year.
He added: “The lack of grade A stock within the market is encouraging landlords to refurbish their existing stock. Those that provide a quality finished product will not only benefit from good demand but will see their headline rent increase.
“While any closure is never good news, a positive to consider is that should Quinn Radiators’ unit be released to the market it will offer 1 million sq ft of grade A space.
“We would expect significant demand from both investors who are looking to sub divide and occupiers in this well-located facility.
“It is also positive to note that we are now witnessing a number of occupiers prepared to consider new-build options, as opposed to waiting for better quality second hand stock to be released into the market.
“Also, we believe the lack of grade A industrial space will lead to occupiers seeking new build as an option so we expect a number of design and build projects to be announced in the next six to 12 months.”