Industrial market update
The industrial market remains buoyant with good demand and limited supply across all size brackets. Rising rents across the region has been a trend since 2013 but many occupiers continue to be shocked by guide rents and rents at review. This fact has seen the ripple effect continue up the main arterial routes across the region. Demand for freehold units cannot be satisfied.
The supply and demand dynamic are illustrated well in Hemel Hempstead where the largest unit currently available is 2 Centro, Boundary Way 16,600sq.ft at a guide rent of £16.50 per sq.ft. This is unprecedented for such a large industrial area in the southern M1 corridor where the development pipeline for the next 12 months is non-existent. New development will be required to set the next rental tone.
Using the same rationale, the market watches with interest to see if rents in Watford will indeed be set at £25 per sq.ft.
But will the upward pressure on rents continue?
We are currently experiencing the first quarter of 2022 with negative growth. Fuel costs are increasing, the cost of living is increasing and wage inflation e.g. HGV drivers (undervalued and underpaid for many years), build cost increases, interest rates are creeping up and the likely business rate increase are a few factors making a difference to profit margins across the sector.
On the other hand, there is a lack of industrial sites, every town in the region is surrounded by green belt, the planning process continues to be slow and difficult, there is a huge weight of money behind the sector with many new entrants, interest rates are still low, there is demand for quality buildings in accessible locations and companies cannot operate from home.
On balance enquiry levels have cooled since Easter. We are likely to experience a slower rate of rent inflation in the second half of the year.