The end of 2016 is expected to see a severe shortage of Grade A industrial stock in the North West, according to a report from Savills.
Despite the North West having the second largest development pipeline of any UK region, with 2.2 million sq ft of new space due across 11 schemes, the firm reports that it’s still not enough to absorb the average take up of 3.44 million sq ft. In 2015, industrial take up in the North West reached a record high of 4.56 million sq ft.
Stuart Murray, industrial director at Savills, says that speculative development is “very much on the agenda in the North West” and he questions “where will the second tranche of new stock come from and who will the developers be?”
It seems that current supply of industrial stock in the North West seems fairly robust at 5.71 million sq ft, however, Savills has said that 81% of this is Grade B or C, with the latter being deemed unsuitable for occupation.
The shortage in Grade A space is resulting in a sharper rise in occupier demand for bespoke units, with 48% of take up last year being build-to-suit deals, compared to 2014’s 18%.
Industrial research director at Savills, Kevin Mofid, comments: “The industrial market has shown significant growth over the past 18 months, with prime rents in Manchester increasing by almost 20% from £5.50 per sq ft to £6.50 per sq ft.
“A combination of constrained supply and increasing build costs have also driven the freehold value of industrial land up considerably and we expect this to continue throughout 2016.”