A mix of high demand and low stock will help keep the Thames Valley’s industrial and logistics market robust in 2023, according to surveyor James Newton.
Mr Newton, surveyor for Vail Williams, based in Reading, says the dynamic is likely to keep upward pressure on rents.
And he believes developers would see any high-quality new or refurbished schemes snapped up if they were brave enough to build speculatively.
He said: “Occupier demand for high-quality industrial and logistics premises boasting a good range of green credentials will remain but so too will restricted supply across the Thames Valley.
“This, together with rising build costs and lower yields, is likely to push rents on further this year as landlords seek to deliver meaningful stock to answer demand.
“There will be challenges for the industrial market – the already witnessed yield movement and construction costs will bring into question development viability, reducing confidence in speculative development.
“However, there is an opportunity to deliver high-quality new or refurbished stock with demand certainly there from occupiers, provided units have the right specification and ESG credentials.
“My message is that there is a great opportunity for landlords to achieve a good return on investment in this market – our experience on the ground with occupiers, tells us that if you build it they will come.”
Mr Newton, who joined Vail Williams for two years ago from Lambert Smith Hampton, has also looked at prospects for landlords, investors and developers in towns across the Thames Valley for the rest of 2023.
He said Reading represents a market with untapped potential and one considered to be cheap in rental terms when compared with other key industrial locations in the Thames Valley, with secured rents sitting at around £13.50 per sq ft on refurbished space, and soon to be £14.50 per sq ft at Suttons Business Park with Units 51/52 under offer.
Mr Newton went on: “The town needs more high spec industrial supply on the ground in and around the Reading area to answer occupier demand. This is especially so with the latest big news that Brookfield’s Reading International Logistics Park, a prime 8.5-acre site off J11 of the M4, is under offer to a confidential purchaser, but fragmented ownership of land makes development opportunities challenging.
“The lack of supply presents optimism for landlords such as Vengrove, for their new 40,000 sq ft unit at Lower Earley called Gem Reading, and for Delancey, who are in planning for a new 45,000 sq ft unit in Reading, Bennet Road. We expect both schemes to see the highest rents achieved in the town by some margin.”
Mr Newton said Slough remains the pre-eminent industrial location in the Thames Valley due to quality of product, location and connectivity, with rents reaching the mid-£20s per sq ft, as competition between data centre occupiers and traditional industrial continues.
“The town does not suffer the complications of fragmented land ownership, making assembly for industrial development a much more straightforward process thanks to large parts of the existing stock being under single ownership.
“Bracknell is second only to Slough in rents achieved, thanks in part to the delivery of new, well specified speculative developments such as Segro Park and West Point.
“Competing demand for single units ought to give landlords and developers confidence in the ability for new build development to push rents on even further here in 2023 given the current supply and demand issue in the market.”
He expects rents in the Theale, Thatcham and West Reading area will rise substantially as new schemes dramatically adjust the rental tone.
He added: “We are confident new record rents will be set when schemes are built, given supply is at an all-time low, and this will continue to drop with strong occupational demand predicted to continue in 2023, despite the current market uncertainties.”
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