Unit 4 Boyatt Wood, Eastleigh
Modern Industrial /Warehouse Unit 10,785 sq. ft. (1,002 sq. m.)
Carlton House, Netley Marsh, Hampshire
Development opportunity 5.6 acres (2.27 ha)
3 Sun Valley Business Park, Winchester
Industrial/Warehouse Unit 3,014 sq. ft. (280 sq. m.)
1 Boyatt Wood, Eastleigh
End of terrace Industrial/Warehouse Unit - 23,222 sq. ft. (2,167.72 sq. m.)
610 Fareham Reach, Gosport
Industrial/Warehouse Unit 28,187 sq. ft. (2,618.62 sq. m.)
Unit 5 Matrix Park, Segensworth, Fareham
Modern Industrial/Warehouse Unit 34,026 sq. ft. (3,161 sq. m.)
14 St John's Road, Hedge End
Modern Ground Floor Offices 2,565 sq. ft.
Merlin Quay, Hazel Road, Woolston
Industrial Units & Wharf Access 77,278 sq. ft.
300 Fareham Reach, Gosport
Newly Refurbished Industrial/Warehouse Unit 42,995 sq. ft.
Boom Time for Commercial Land Owners?
- Author: Jason Webb & Kerry Sutherland
It has been widely documented that the industrial sector on the South Coast is suffering from a dwindling supply of good quality space which is leading to rental growth as robust demand continues from manufacturers, internet retailers, and urban logistics occupiers.
According to the IPD monthly index, UK industrial rents increased by 2.9% in 2014, and the industrial sector remains best placed to provide growth going forward, and this has spurred renewed interest in new industrial development.
Nationally, industrial construction output (factories and warehouses) picked up strongly in 2014, albeit from a low base in 2013. Growth of 12% was recorded for 2014 and a further 27% is predicted over the next three years to 2018. The warehousing subsector will lead this growth, being closely correlated to growth in the economy, consumer spending and internet shopping.
Along with recorded and predicted rental growth, we have seen a significant yield compression on well let multi-tenanted industrial estates, with such assets as Endeavour Park, Southampton trading at just over 5% NIY.
With all this good news, landowners should be rubbing their hands with glee and expecting commercial site values to rise, but there is a significant fly in the ointment that may disappoint many – build costs.
We may now be standing tall on the shoulders of a recession that saw the demise of a number of national contractors such as Rok, Connaught and John Laing Partnership and looking across a cityscape of more prosperous times. However, this is not without its own challenges. Figures reported by the Building Cost Information Service (BCIS) have shown tender prices for new build industrial premises soaring to over 50% more than pre-recession prices in some cases. The all-in tender price index shows that generally, following the pre-recession peak at the end of 2007, costs dipped by around 17% in first quarter 2010. Forecasted prices for first quarter 2015 show a recovery from this slump exceeding these pre-recession prices by over 2%.
This may not be surprising as diminished competition is driving contractors to be more selective and many are reporting difficulties in securing skilled labour and sub-contractors at competitive prices. This is despite the global reduction in the price of oil and a 5.5% reduction over the last 12 months in the world-wide price of steel which is often a key indicator of overall construction costs.
In real terms, these changing costs are shown on the table below:
|Changes in Warehouse build costs over the last 10 years|
Median Build Costs
2005 and 2010
Median Build Costs
2010 and 2015
Median Build Costs
2005 and 2015
|Sq m||Sq ft||Sq m||Sq ft||Sq m||Sq ft|
|New build warehouses|
|Up to 500 sq m GFA||620||57.60||+20.48%||747||69.40||+30.39%||974||90.49||+57.10%|
|500 to 2,000 sq m GFA||520||48.31||+5.77%||550||51.10||-2.36%||537||49.89||+3.27%|
|Over 2,000 sq m GFA||426||39.58||-4.46%||407||37.81||+24.08%||505||46.92||+18.54%|
|Purpose built warehouses|
|Up to 500 sq m GFA||685||63.64||+9.05%||747||69.40||+45.65%||1088||101.08||+58.83%|
|500 to 2,000 sq m GFA||514||47.75||-12.26%||451||41.90||+16.85%||527||48.96||+2.53%|
|Over 2,000 sq m GFA||475||44.13||-5.89%||447||41.53||+28.19%||573||53.23||+20.63%|
Typically, build costs will account for circa 50% of total development costs, whilst land costs will only be circa 25%. It is easy to see therefore why even in times of rising Gross Development Values, site values will potentially remain static.
For further information please contact:
« All articles
Search for a property
Use a combination of size, type and location filters to find a property.Property search »
See how we put our skills and expertise into action.Case studies »