The Crawley/Gatwick logistics and industrial market is experiencing a severe disconnect between supply and demand, which restricted take-up in the first half of 2017.
This is driving up rents and triggering a new wave of speculative development, according to research by property advisory firm SHW.
“A quick look at the raw data illustrates the extent of the problem, with current unsatisfied demand now standing at over 800,000 sq ft and availability totalling 415,000 sq ft - or just 4.1% of total built stock,” says SHW’s head of agency Tim Hardwicke.
Although take-up in and around Crawley was reasonably strong in the first six months of 2017, at 123,500 sq ft, Hardwicke says this figure would have been significantly higher had more stock been available.
“When new developments do come online, they tend to be snapped up quickly,” he says, citing the example of Gatwick 55, a 55,000 sq ft unit in Crawley that SHW pre-let to furniture retailer Barker & Stonehouse last year, just two days after planning permission was granted.
Hardwicke says logistics operators that are interested in units over 20,000 sq ft are drawn to the Crawley/Gatwick area because of its motorway connections rather than proximity to the airport.
“Some of the requirements are being pushed down from places like Croydon, which is also experiencing stock shortages and where rents are potentially higher,” he says.
Rents in Crawley/Gatwick have increased by around 25% in the past 12 months to reach £13/sq ft on larger, non-trade-counter warehouses. Quoting rents have topped £14.50/sq ft for pre-lets on new-build stock and are even higher for the best trade counter schemes, according to Hardwicke, who adds that limited stock levels have resulted in reduced incentive packages.
“Against this background, developer appetite is unsurprisingly strong,” he says.
Against this background, developer appetite is unsurprisingly strong - Tim Hardwicke, SHW
LondonMetric is speculatively building 112,000 sq ft across three buildings on the former BOC site in Crawley in partnership with Volume Developments, for example. One of the units has been let to Boeing ahead of completion early next year.
And at Tungsten Park, just south of Crawley, SHW has agreed terms to sell half of an 83,000 sq ft scheme to an owner-occupier. Discussions are continuing with four parties for the remaining unit, construction on which is due to start in the first quarter of 2018.
“Competition for industrial land is intense, as evidenced by the 17 bids that were received for a three-acre site at Pease Pottage, on the outskirts of Crawley,” says Hardwicke.
The site was sold to Gallagher, which has pre-let a 20,000 sq ft unit to Scania for a lorry and coach service centre. It has submitted a planning application and is awaiting a decision.
Nearer Crawley town centre, Wrenbridge has submitted a planning application for two units totalling 70,000 sq ft on a two-acre site at Crompton Way.
Like rents, land prices have climbed by around 25% in the past 12 months, which could have an impact on the viability of future development.
“[Industrial land prices] are growing at a similar rate to residential land prices and the lack of sites is likely to continue to be a problem for developers and occupiers actively seeking new plots and units,” says Hardwicke.
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