In a market that has seen unrelenting growth over recent years, much of the focus of the industrial sector in Birmingham and many of the headlines have been on the take-up of big box units by high profile occupiers.
While this is still the case, we have also witnessed the rapid growth of the local, multi-let industrial market which generally comprises smaller units of between 5,000 and 20,000 sq ft. In greater Birmingham this has become apparent across a number of Savills schemes, which are now seeing historically low vacancy rates.
Gravelly Industrial Park, an 80-acre site on the outskirts of the city centre, currently has zero availability. At a site totalling 78 units, this would have been unheard of just a few years ago and shows first-hand the demand for space of this nature.
Equally, two other Savills sites, Monkspath Industrial Estate and Elmdon Trading Estate, are both experiencing void rates of approximately 2 per cent, dropping significantly from the 7-8 per cent rates we were previously accustomed to, with the void only due to recent lease ends. We are seeing occupiers of all natures looking for space at these sites, and while take-up is primarily driven by local businesses seeking a storage or distribution facility, we are also transacting with national occupiers looking for a more localised, regional hub.
As a consequence, this uplift in demand has triggered strong rental growth across the sector, with rents now pushing £10 per sq ft in certain locations, and continuing to grow by approximately 25-50p per sq ft every three to six months at the moment. This growth has put added pressure on the market and those who act swiftly are able to make substantial cost savings, compared to what rents could increase to in just a few months’ time.
So where does this leave the sector in Birmingham?
As with many other industrial sub-sectors, the development pipeline is not set to meet the current levels of demand. However, what is also problematic is that for the majority of landlords and developers, the focus for development is on big box units of 100,000 sq ft. There is very little coming through on multi-let schemes below 20,000 sq ft, given that it often costs more to build them and also then has to be let to multiple occupiers. This has led to a drive to refurbish existing stock instead, such as on Elmdon Trading Estate where all units are being refurbished to achieve an EPC B rating.
The lack of available stock in the Birmingham area has also led to an uplift in take up in the region’s secondary markets, with the likes of Wolverhampton, Telford and Redditch all seeing a rise in activity with rents in both Wolverhampton and Redditch reaching £7.50 per sq ft on new units.
As for the rest of this year, we see no indication of a slowdown in this market. Requirements remain strong and rents continue to rise – we expect the latter to grow by at least another 10 per cent this year and next in and around Birmingham. Whether there is enough available stock to satisfy the demand remains to be seen.
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