Western Corridor industrial rents continue to soar
Latest research indicates that prime headline rents are up by 6%
JLL has published its Western Corridor Industrial & Logistics Market Report for the first half of the year (H1 2019), analysing the industrial market throughout West London and the Thames Valley. The report’s highlights included the following:
- Occupier take-up of logistics floorspace across the Western Corridor totalled 2.6m sq ft in the first half of 2019, 7% down on the half-year average over the past five years, due to lack of supply
- 1.8m sq ft was transacted in West London and take-up reached around 800,000 sq ft in the Thames Valley
- A third of all take-up in H1 2019 was in Grade A floorspace, 30% higher compared with the historic five-year half-yearly average.
- At the mid point in 2019 there was circa 1.1m sq ft of industrial floorspace speculatively under construction across the Corridor compared with 710,000 sq ft a year ago
- On average, prime headline rents increased by 6% over the 12-months to the end of September 2019
Tessa English, director, UK research at JLL, commented: “Sustained levels of take-up across the Western Corridor were recorded in the first half of 2019. 2018 recorded one of the strongest years on record for take-up along the Corridor and whilst we are not expecting take-up this year to exceed that we anticipate another robust year of activity with take-up in 2019 likely to exceed the five-year historic average. Even with a pick-up in speculative development, we expect supply to remain at a low level and believe these demand and supply fundamentals will encourage further rental growth across the Corridor. The new speculative development that is coming forward across the Corridor is bringing some much-needed Grade A stock to the market.”
The report highlighted that strong investor demand for industrial space has persisted across the Western Corridor this year keeping yields at a historically low level. Prime yields were 3.50% for West London and 4.00% for the Thames Valley at mid-year, which was unchanged from a year ago.
Adam Creighton, associate director in national investment at JLL, added: “We’ve seen a good balance between occupational supply and demand across the Western Corridor so far this year which has been attractive to investors. Interestingly we have seen new entrants into the market with investors and developers looking to capitalise on these strong market fundamentals and positive rental growth forecasts. The year has seen increasing interest from traditional big box logistics developers and investors in the Midlands market who are looking to rebalance their portfolios and increase their exposure in the London and South East due to the strong predicted performance.
The research also revealed that Heathrow remains resilient within the wider market, demonstrating good levels of demand for the speculative floorspace as well as solid demand for pre-lets. In the last 12 months, the Heathrow market reported some of the largest pre-lets it has ever seen
Melinda Cross, director, industrial and logistics at JLL, concluded: “The Heathrow market remained resilient in H1 2019 despite wider market forces. Despite a slow start at the beginning of the year more operators quickly emerged that were looking for space which translated into several transactions by the half-year point. Demand in the first half of the year was driven by companies with lease expiries looking to consolidate and upgrade into one modern facility rather than several older units. At the start of H2 2019 there were a range of deals in the process of being agreed particularly in the mid-range and large box size. There are also a large number of contract-led enquiries in the market.”
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of nearly 92,000 as of June 30, 2019. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated