Hertfordshire & Northern Home Counties industrial market update
The news is full of unknowns and economic factors all going in the wrong direction. Is it any wonder that land pricing is no longer at the heady heights of 2021 and early 2022?
Low yields and forecasted rents drove land pricing by effectively double counting growth. This situation coupled with interest rate increases, build cost inflation and the increased cost of borrowing has caused a correction and some of us would say “inevitable” as the super charged market was not sustainable.
This year industrial demand from e-commerce has decreased, 3PL’s can fulfil contacts within existing portfolios and the food and drink sector is feeling the squeeze. The market is simply back to more normal levels of demand.
Brasier Freeth has seen success this year on good quality schemes where land was purchased circa 3 years ago, planning was forthcoming and speculative development was well funded. By way of example Ascent Logistics Park, Leighton Buzzard was developed speculatively as an 8 units scheme from 15-125,500 sq.ft and only 1 unit of 48,639 sq.ft remains available and Symmetry Park, Aston Clinton, Aylesbury 2 of the 3 units were let under construction, again leaving only one unit of 116,487 sq.ft available.
It is true the supply of Grade A units across all size brackets in Herts, Beds and Bucks remains constrained. The counties have stringent green belt policies and understaffed planning departments. Consequently scheme currently on site will let well but there is no doubt that it will be harder to get the numbers on new sites to stack next year without pre-lets.
But are we overreacting, surely we all got too swept up in huge leaps in the market?
Occupiers have certainly been commenting that 45-50% rent increases at review coupled with rising costs (business rates, energy, interest rates etc) were unsustainable.
Following another change of PM there is much for government to do to restore economic stability. The government has the bigger questions to resolve such as trade agreements, value of the pound on the world stage, ensuring no child goes to school hungry, energy security and how to recruit more nurses to name but a few. Industrial landlords may find that they have a part to play by supporting occupiers at this point in the cycle as well as having to accept an absence of the recent levels of rental growth.