Industrial Market at Breaking Point
When you think of Milton Keynes you think ‘modern town’, which in turn must mean ‘modern stock’. The truth and reality however is quite removed from this.
There has over the past 6 months been a distinct shift in what companies are looking for, before most were cost conscious simply looking at the bottom line figures. Compare this to now, many businesses are looking for an upmarket image and willing to pay the extra rent associated with such stock. As a direct result the market has dramatically shifted.
Modern estates such as TORC:MK, Integra and Kingston Business Park One are all at the point of writing this, fully let. Modern estates are at breaking point with demand outstripping supply almost three to one. The only true industrial scheme which was built in the last 10 years with availability is that of Chancerygate in Denbigh West where there are several 3-7,000 sq ft units available although only fitted to shell & Core.
Speculative development of smaller multi-let schemes is still some way off. This is due to a number of factors including constrained land supply, market confidence and funding criteria’s placed on developers.
Unlike larger units of 20,000 sq ft plus, smaller pre-lets are hard to secure, companies looking for such units usually do not give consideration to their move at most until 6-9 months prior to lease expiry, whereas in reality a design & build will take 9-12 months providing there is an ‘oven ready site’ already identified, if not timescales will be further protracted.
How does this affect me?
If you are a landlord that owns modern high grade space in and around MK, it enables rents to be pushed upwards. This has been proven by the likes of the TORC:MK scheme built in 2006 whereby two years ago estimated rental values sat at £5.75 - £6 sq ft, they are now sitting at approximately £7.25 sq ft which reflects an uplift in excess of 20% in terms of rental.
Interestingly as a direct consequence of the lack of Grade A space, good quality/refurbished secondary stock has seen rentals strengthen and incentives draw in, as tenants who previously desired modern space are being forced to consider more secondary stock due to current market supply which in turn is now starting to push the entire market upwards.
From tenants prospective, the market place is only going to continue to harden. Tenants need to come forward over the next 3-6 months to try and capitalise on any remaining incentivised deals left in the market place.