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Short Supply of Industrial Units Cripple Welsh Momentum – Report

A logic report from the UK’s leading independent real estate consultancy firm, Knight Frank has revealed that the momentum gained by Wales in the first quarter of 2018 has effectively been lost due to a lack of supply in industrial units over the 50,000 sq ft range.

Neil Francis, head of Knight Frank’s Industrial & Logistics agency division in Cardiff, said: “Frustratingly, despite a number of active requirements in the market, the lack of good quality stock within Wales has hindered this early momentum and resulted in lower take-up than expected.

“Our research shows that the total take up in Wales during the first half of the year, for occupied buildings over 50,000 sq ft, has only reached approximately 650,000 sq ft over seven recorded transactions. This figure is 450,000 sq ft less than the take up witnessed in the first half of 2017 and highlights the growing need for new development in the area.”

The year started off positively for Wales with several transactions taking place in the first six months of the year including the purchase of 180,000 sq ft by TVR in Rassau Industrial Estate, Ebbw Vale.

At the beginning of the year, Smurfitt Kappa and BCB International purchased 131,500 sq ft and 51,000 sq ft in Abercarn and Cardiff respectively.

Regarding the BCB deal, Mr Francis commented: “It was pleasing to witness local companies such as BCB International and Concrete Canvas (89,000 sq ft in Pontyclun) acquiring units that will allow them to grow and expand their business.”

In wales, 3.15 million sq ft stock is available providing units above 50,000 sq ft, and this is only 150,000 sq ft less than the space reported by the end of 2017.

Neil Francis added: “As a response to the strong demand for good quality space St Modwen is pressing ahead with the speculative development of two units at Celtic Business Park, Llanwern where there will be 30,000 sq ft and 100,000 sq ft available from the Summer of 2019. The Welsh Government has also reacted to demand close to the Heads of the Valleys, and the impact of TVR locating to Rassau Industrial Estate, by advancing plans and commitment to develop[ing] 50,000 sq ft at its site in Rhyd y Blew in Ebbw Vale.

“It is also worth noting that for units of 20,000 sq ft to 50,000 sq ft demand continues to be so strong that, similar to the “big shed” market, all good quality stock is being acquired, and in many circumstances record capital value and rental levels are being paid with incentives on new leases not as hard as they were in recent times.”

Furthermore, Knight Frank’s statistics show there are numerous units over 50,000 which are under offer. This will inevitably bring up the second half of 2018 if completed which would put Wales back on the map, exceeding over 1 million sq ft similar to previous years.

Mr Francis stated that: “There are currently many requirements from logistics operators who are actively seeking new space close to junctions of the M4 Motorway. In most cases, they want a bespoke facility with a large yard area and low site density to allow them to develop their fulfilment centres

“We are aware of many developers eager to capitalise on the interest shown in Wales, the strong workforce and relatively cheap land. However, development in many areas is still not viable and whilst assistance from the Welsh Government will be required in some form there is a growing realisation amongst both developers and occupiers that rental and purchase prices need to increase to enable new development to be undertaken.”

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