March 27, 2015
SPACE SHORTAGE MAY HIT MILTON KEYNES
Back in Milton Keynes, the largest industrial site is the 26 industrial acres at Pineham, north of the city centre. But so far industrial rents have not justified speculative new industrial buildings.
Paul Davies, Bidwells industrial partner, says rents will have to rise to £6.50/sq ft from the current level of under £5/sq ft, before a developer would embark on speculative development.
Industrial investors are therefore mirroring the office market and buying industrial estates with empty units and leasing them. Last year Schroder Real Estate Investment Trust paid USS £9.2m for the Stacey Bushes Industrial Estate, on the A5 north-west of the city centre.
At the time, seven units, making up a quarter of the 213,536 sq ft estate, were vacant. But in the intervening months, all but 6% of the space has been let at rents between £4.25/sq ft and £4.80/sq ft on five-year leases.
Similarly, Palmer Capital Partners took over an 18%-void rate last autumn when it bought Blakelands Industrial Estate on the A5 from Cornerstone. Since then, it has made eight lettings and reduced the empty space to 7%, but the tenants are only paying £4.25/sq ft.
Elsewhere, the development story is cheerier. In Letchworth in Hertfordshire, St Modwen is developing 90,000 sq ft of industrial space on the site of a former power station in Works Road. One of two 15,000 sq ft units is under offer and St Modwen reports interest in the remaining three units.
All in all, the letting activity in the region’s office market so far this year indicates that there could be greater activity than last year. But when it comes to industrial the picture is less clear. What is needed now is for developers to give occupiers a chance to move into something new.
Author: Christine Eade – Property Week