Supply

The level of supply within the region currently stands at 4.31m sq ft across 23 separate units, a 50% decrease from this time last year. According to the average annual take-up, there is now just 0.91 years’ worth of supply in the region.v

The current stock is heavily skewed towards lower quality second-hand units. Currently, just 20% of space on the market is Grade A, whilst 44% is Grade B, and 36% Grade C. Closer analysis highlights that a large proportion of this stock is in need of refurbishment and is not currently capable of accommodating modern occupier requirements. Developers are beginning to recognise this, and we are seeing older Grade B and C units refurbished to provide fit-for-purpose space.

Furthermore, in terms of unit count, 70% are within the 100,00–200,000 sq ft size band, whilst 26% are within the 200,000–300,000 sq ft size band and 4% in the 400,000–500,000 sq ft size band. The largest unit on the market is Stafford 475 comprising 474,591 sq ft of Grade B second-hand space. The shortage of vacant stock is reducing the incentives offered with transactions whilst pushing on rental growth. With the current supply and demand dynamics, we predict rental growth will exceed the 2.2% p.a forecast by RealFor in the next five years.

Take-up

Take-up in H1 2021 reached 3.75m sq ft across 21 separate transactions. Historically, demand has centred around the manufacturing and automotive sectors; however, we are now seeing a rapid uptick in activity from other occupiers. In 2021, 47% of activity has come from 3PLs, 30% from online retailers and the remainder spread over other sectors – a positive indicator for the market.

Occupier preference has revolved around Grade A space, accounting for 85% of space transacted in the region. Grade B space accounted for 8% of all space transacted, whilst 7% was Grade C. Activity continues to revolve around smaller-sized units – by deal count, 71% were within the 100,000–200,000 sq ft size band, and 14% within the 200,000–300,000 sq ft band. The largest deal this quarter was CEVA leasing Wolverhampton 450 comprising 448,089 sq ft, it was speculatively developed by Panattoni.

Development pipeline

There are 11 units currently under construction within the West Midlands, totalling 1.86 million sq ft. Nine are within the 100,000–200,000 sq ft size band, and two within the 300,000–400,000 sq ft band.

_{Read the articles within Big Shed Briefing below.}