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News Release

London

Western Corridor industrial and warehouse market bucks national trends 

Say Jones Lang LaSalle in latest Industrial and Warehouse market report


London, 29th September 2011 - The Western Corridor industrial and warehouse market, covering West London and the Thames Valley, bucked the national economic and industrial market trend when it posted a record level of take-up in the first half of 2011 say Jones Lang LaSalle in their latest Western Corridor Industrial and Warehouse Market report.
 
Despite a slowdown in national economic activity and a decline in industrial and warehouse take-up across the UK, take-up in the Western Corridor hit a 10-year high in H1 2011 with 2.5 million  sq ft transacted for occupation.

The uplift in take-up was led by West London, especially a marked revival around Heathrow Airport. By contrast, take-up in the Thames Valley fell compared with H2 2010, although it remained well above the 10-average level. 
 
Despite stronger demand, the overall vacancy rate across the area remained at 8.7%, as a reduction in grade A availability was offset by a rise in available secondary floorspace.

Resilient demand and a reduction in Grade A availability has encouraged some developers to return to speculative development and a number of schemes are now underway in core Heathrow, Park Royal, Southall, Uxbridge and Slough.

Headline rental values for Grade A stock have now stabilised across most of the region and there has been an improvement in net effective rents in core markets.  Prime headline rents at mid-2011 stood at £14.00 per sq ft in the immediate vicinity of the Cargo Terminal, with the expectation of rents moving to £15.00 per sq ft again, but remain at £12.50 to  £13.00 per sq ft in the wider Heathrow area.  In Park Royal, rents of £13.00 per sq ft are achievable, while in Slough they remain at £11.75 per sq ft.

The region remains highly sought after from an investment perspective with investor demand focused on prime single and multi-let investments, where prime yields are between 6.50% to 7.00%.

Andy Harding, Director National Industrial Logistics at Jones Lang LaSalle said: “In the last 12 months the Western Corridor has remained relatively resilient despite the national slowdown. Developers and investors continue to have faith in the region and we remain confident that this region is well placed to weather the challenging economic conditions we face. Overall, we see the market balance continuing to move gradually in favour of landlords.”

Looking ahead, take up is likely to be strong in the second half of the year and this will continue to erode the availability of grade A stock in core markets. Beyond that, the impact of further economic uncertainty seems bound to affect confidence and we would expect take up to settle back to more average levels in 2012.

The erosion of grade A availability will drive development activity in core markets and there are likely to be speculative construction starts of small and medium sized units, particularly in the Heathrow area, Park Royal and Slough. We anticipate upward pressure on site values as developers compete for the best opportunities.

It is our view that headline rents for grade A stock will remain stable in 2011 across most of the region but that typical rent free periods, on 5 year leases, will continue to decline.  In 2012, we forecast modest growth in rental values in all the key markets.

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