Demand for industrial property outstrips expectations

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As reported by Bdaily’s Members’ News, Coventry-based commercial property agent Bromwich Hardy says that the market in key parts of the midlands is now becoming highly competitive and just as active are markets further south. Across the regions agents are finding that demand is running ahead of supply.

Founding partner at Bromwich Hardy, Tom Bromwich has said that, for example, two recent lease deals were on industrial units at Harrowbrook Industrial Estate at Hinckley. Both deals were completed in record time, indicating the strength of the market, and the huge demand for East Midlands industrial units, as the country recovers from the pandemic.

“We have recently concluded deals for our client Mileway on Unit D1, D2 and D6 and set new groundbreaking rents at the estate on both leases,” said Mr Bromwich.

“Both units are in a fantastic location, benefiting from an excellent landlord in Mileway and are in first-class condition. Unit D1 & D2, which extends to more than 15,500sq ft, had just benefited from a comprehensive refurbishment to bring it up to the highest standards, whilst the 7,500 sq ft on offer at D6 was also hugely sought after.

“In fact, we could have let either of them three times over such was the quality of the offer. The market in Hinckley is now starting to rival those further south like Coventry and Leamington, with its excellent transport links and skilled workforce helping drive demand.”

The same picture further north…

The late Blackburn Rovers owner Jack Walker built his empire on steel, as a steel merchant, and he built a rambling industrial estate south of Blackburn – the Walker Industrial Estate on Junction five of the M65 motorway – recently acquired by San Francisco-based 4th Industrial, backed by US based TPG Real Estate Partners, with $6.4bn of assets under management.

The deal was hailed as a “significant vote of confidence” in commercial property as well as the national and local economies, post Brexit and post the pandemic.

The confidence shown by 4th Industrial and TPG Real Estate Partners is seen as firm evidence of the growth in the demand for industrial space in Lancashire and the confidence show by foreign investors in the UK.

Simon Wood, head of investment at B8 Real Estate, acting as agents for the buyers, told LancashireBuisnessView.co.uk (LBV) that there was plenty of demand for the Walker industrial park, which was sold for an undisclosed sum.

Wood says:

“Lancashire has a vibrant industrial base which is driving demand for space all along the M65 corridor from Chorley to Blackburn. We particularly liked the Walker estate because of its excellent layout and the opportunities to add value.

“This deal demonstrates the way in which major overseas investors are increasingly willing to look beyond the M6 corridor and make significant investments in industrial areas like Blackburn. As such, it represents a significant vote of confidence in the North’s economy.”

The Walker estate with its 21.3-acre site was redeveloped by the Walker family following the sale of its steel supply business to British Steel for £330m in 1989. At the time, according to LBV, it was the largest sum ever fetched for a private company.

Currently the park houses eight fully let units totalling 324,340 sq ft of space with an annual rent roll of £1.49m. Tenants include Wincanton, Perspex International, Steel Dynamics, NeoNickel (Blackburn), Pentland Wholesale and Carlisle Interconnect Technologies.

Manchester-based The Property Alliance Group also bought in Lancashire recently, acquiring a 32,166 sq ft industrial unit in Blackpool for £1.3m. Smaller units are also in high demand in Lancashire, with PJM Property Investments acquiring Cuerden Green Mill in Lostock Hall and other units at Charnley Fold Lane at Bamber Bridge, plus the group bought Gaskell House in Rough Hey Road, Preston.

PJM director Patrick Murphy told LBV:

“The demand for good warehouse space is high. Our model is based on acquiring, adapting, and modernising commercial properties to make them attractive to new occupiers.

“All three of these properties will help us support the Lancashire economy by providing viable spaces for growing businesses in thriving locations.”

Supply difficulties

Industry experts say the wider North West market reflects the industrial property market nationally which is characterised by a significant supply shortages coupled with strong occupier demand, leading to competition the available units and increasing rent levels.

New builds held back

Building work has been hampered by the pandemic and more recently by bad weather. The February storms led to a hold up on building sites but the construction industry says it’s now on track for a sustained long-term recovery.

Figures from The Office for National Statistics (ONS) show that there was a 0.1 per cent decrease in construction output in February over the previous month. With storms Dudley, Eunice and Franklin, having a big impact in the north. They caused disruption that was untypical for the time of year, prompting the complete closure of construction sites with overruns and delayed progress on projects.

Beard Construction finance director Fraser Johns has said that there are long-term signs of recovery, demonstrating “the resilience of the sector”.

War and inflation

The next big challenge would appear to be supply issues and increasing prices. Gareth Belsham, director of national property consultancy and surveyors Naismiths, told LBV that the latest data painted a picture of the industry “on the eve of war”, referring to the Russian invasion of Ukraine in February. Since then, the industry has seen the impact of the ongoing conflict along the global supply chain, he said.

“Construction is highly reliant on global supply chains for building materials, and the imposition of tough sanctions on Russia following its invasion of Ukraine is now disrupting the supply of key materials, including steel and timber,” Mr Belsham said.

Last week the Construction Leadership Council said building material suppliers were issuing quotes that were valid for only 24 hours, “as fears of inflation rattled the industry.” This has been attributed to both the Russian invasion and the pandemic.

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LATEST: Government gives landlords direct access to £350 electric vehicle charge point grants

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Government ministers have launched an electric vehicle ‘charge point grant’ for landlords to encourage more homes within the UK to accommodate electric vehicle ownership.

Under the scheme, both residential and commercial landlords will be able to apply for 75 per cent of the cost of charging points as electric vehicle ownership soars – up 186% during 2020, official figures show.

The new system replaces the Electric Vehicle Homecharge Scheme and provides landlords across the whole of the UK up to £350 where they own parking areas – previously only tenants had been given access to the scheme.

There is a catch. Landlords must be VAT registered or registered at Companies House to be eligible. 

A related scheme enables tenants to apply for a similar grant on their own behalf, so where landlords do not meet the registration requirements – for example, if they are not company or VAT registered landlords – then tenants can apply themselves for a grant to have a charging point installed.

Net Zero

Timothy Douglas, Head of Policy and Campaigns at trade association Propertymark, says: “The announcement is welcomed and due to the size of the private rented sector and the substantial role it will play in a greener future, we hope that in time, the scope of eligible landlords can be widened to meet the changing needs of tenants and help towards our Net Zero targets.”

There are several conditions that must be met to be eligible for a grant which are being administered by DVLA on behalf of the Office for Zero Emission Vehicles, and are claimed using a manual process initially, with a digital service expected in the Summer of 2022.

Read more about the scheme.

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Article 4s Blocked PD Window of Opportunity

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A Window of opportunity now exists for property developers in areas with expiring Article 4 restrictions? The Housing Minister, The Rt Hon Stuart Andrew MP, has asked a number of London Boroughs to revise their article 4 applications rejecting blanket Article 4 applications across Boroughs.

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Extra layer of Management with RTM?

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We have just been successful with our Right to Manage ‘bid’ and the handover is in June. What is concerning a number of us is that our current management company is managed by and answers to a property management company

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Generation Rent aims to stop landlords using Section 13 notices to raise rents ‘unfairly’

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Tenant advocacy group Generation Rent has set its sights on preventing landlords from raising rents via Section 13 notices by reforming the Fair Rent tribunal system that underpins them.

The group, which is headed up by Baroness Kennedy and has considerable clout in Whitehall and local authority corridors of power, says its research suggests the whole Fair Rent review system is tipped too much in the favour of landlords.

Research chief Dan Wilson Craw (pictured) says he expects more landlords to turn to Section 13 notices to raise rents once it becomes more difficult to evict tenants when ‘no fault’ Section 21 notices are eventually abolished by the government within its much-anticipated Spring rent reform White Paper.

“If landlords can no longer use the threat of a Section 21 eviction to force tenants to pay a higher rent, we might expect more landlords to use Section 13 notices,” he says.

“This may result in more cases where the tenant has to move because they cannot afford a higher rent – cases that could be thought of as ‘economic evictions’. The Rent Tribunal will in turn become more important.”

With an assured shorthold tenants (AST) tenants can challenge a rent rise if it is ‘significantly higher’ than similar ASTs in the area.

Tribunal decisions

Generation Rent looked at 341 Fair Rent tribunal cases between January 2019 and August 2021 and found that tenants who challenge a rent increase at the Rent Tribunal come away with an average increase of 5.5% per year – much higher than rent inflation in the country, and much higher than most people see their wages increase by.

“This is because the Rent Tribunal bases its decisions on what similar properties to your home are being listed for on the market,” says Craw.

“Without an overhaul of the Rent Tribunal, renters will continue to face unaffordable rent increases and economic evictions after the abolition of Section 21 evictions.

“This is why we argue that alongside efforts to restrict Section 13 notices, improve awareness of the Tribunal and widen accessibility for renters, capping rent increases in tenancies at wage inflation is needed to protect renters from unaffordable rent rises.”

Read the Generation Rent blog in full.

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LATEST: EPC firm launches first-of-kind Band C upgrade consultancy service for landlords

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A company based in Wales has launched a first-of-a-kind service that helps landlords work out how to most cost-effectively raise a property’s performance to EPC Band C.

Vibrant says its EPC Plus service is offered alongside the mandatory EPC that every rental property must undergo every ten years.

Each bespoke report produced by Vibrant as part of the EPC Plus service details the current and potential EPC rating, how it compares with the average for the area, the CO2 produced by the property each year and the CO2 savings that could be achieved.

The report itself has been designed to be simple to understand, with clear and concise advice on what upgrades and improvements are recommended, as well as information on multiple sources of funding that may be available.

Services like are ‘nice to have’ but the government’s proposals to force all landlords to bring their properties up to a Band C by 2025 for new tenancies and the remainder by 2028 will make it a pressing and expensive issue for millions of landlords very soon.

These proposals as they currently stand will impact an estimated 3.2 million landlords whose properties have an EPC rating of D or below.

“The increased attention on improving the performance of the UK housing stock means that in the coming years landlords will be under greater pressure to make improvements that will bring down energy usage,” says Daniel Kittow, MD of Vibrant.

“Our EPC Plus Service will provide them with a complete overview of the current performance alongside clear and targeted recommendations, allowing proactive improvement and management of each property.”

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