Demand continues for outstrip supply across the South East industrial market
Rents continue to rise due to demand significantly outweighing supply across the South East industrial market, according to SHW’s Q1 2023 South East Industrial Focus.
Tim Hardwicke, SHW’s partner and head of agency, comments: “On the whole, 2022 saw a good level of take up across all size ranges, with lower take levels generally in locations where availability of good quality stock is restricted. As predicted, strong demand continues to be linked to logistics / B8, rather than B1 manufacturing, due to the continued need for space to serve online retailing / last mile logistics. However, this sector was beginning to slow down towards the end of 2022 and we see this continuing into 2023.”
In Croydon and the surrounding areas, rents have increased from £16 per sq ft in 2021 to a highest £19.75 per sq ft achieved in 2022. Take up was just above 2021 levels with 453,000 sq ft let in 2022. With availability being halved to 670,000 sq ft and very strong logged demand (totalling 5.5 million sq ft), we should see the current 4.4% vacancy rate drop and rents remaining high in 2023.
In Sutton, Epsom, Chessington and Leatherhead, take up jumped in the second half of 2022, showing a significant increase by the end of 2022 to 178,000 sq ft (up from 102,000 in 2021). Rents increased from £15 to £17.50 per sq ft and these are likely to keep pace, with 1.2% vacancy (85,000 sq ft available) and total logged demand of 920,000 sq ft.
Redhill and Reigate recorded a relatively low take up of 48,000 sq ft in 2022, compared with 195,300 sq ft in 2021. Rental levels remain static at £13.95, however demand still outstrips the current availability for the right stock and it’s expected that rents around £17.00 will be achieved shortly.
The vacancy rate in Burgess Hill and Haywards Heath remains low at 2.9%. A healthy take up was recorded, with 128,000 sq ft let in 2022 (134,000 sq ft in 2021). With extremely high demand totalling 1.76 million sq ft in 2022 and availability standing at 65,500 sq ft, rents should edge up from the £13.25 per sq ft recorded in 2022 for the right properties and newbuild schemes are likely to see £16-17.00 per sq ft in the future. Of the total 109,500 sq ft built at Sussex Junction, Burgess Hill, just one self-contained unit of £46,500 sq ft remains available at £14.50, accounting for more than half the total availability in the area and there is good occupier interest being shown.
In Crawley and Gatwick, rents increased from the fairly static £13.75 over the last four years to £16.00 in 2022. Take up was down from 2012 levels (512,000 sq ft) to 350,000 sq ft in 2022 plus another 110,000 sq ft pre-let which is not accounted for in these figures yet. There are a number of new build schemes now being marketed, including the two units totalling 235,700 sq ft at The Base, plus 65,000 and 18,800 sq ft at Arrow Point, both in Crawley, adding up to 1,031,000 sq ft of availability which will go some way to matching the demand logged at a total of almost 3.5 million in 2022.
Horsham has seen relatively static rents at around £12.50 per sq ft due to the severe lack of stock and any newbuild schemes coming forward are likely to be around £14.50-15.00 per sq ft. Take up slightly exceeded 2021 levels, reaching 90,000 sq ft in 2022. Much needed new build schemes are coming through, including more space at Billingshurst Business Park to provide for the 840,000 sq ft of demand and also two schemes in Southwater on the outskirts of Horsham.
On the Sussex Coast, demand remains extremely high, with availability still very low. Brighton & Hove has a 1.2% vacancy, equating to 58,000 sq ft available. Logged demand exceeded 2 million sq ft in 2022, but just 75,000 sq ft was let (down from 87,500 sq ft in 2021), demonstrating the urgent need for new and refurbished industrial space. Panattoni Park Brighton, Shoreham Airport, which is about to start construction, will provide a total of 257,000 sq ft of new space this year.
In Eastbourne and the surrounding areas, demand also remains high at nearly 2.5 million sq ft, pushing rents up slightly to £12.50 sq ft in 2022. Just 89,000 sq ft was let (down from 288,000 sq ft in 2021), including 20,000 sq ft which was split and refurbished into two units and taken by East Sussex Country Council and Go Plastic Pallets. Availability remains low in comparison to demand with 185,000 sq ft recorded.
In Hastings, St Leonards and Bexhill, take up has again soared from 76,500 sq ft in 2021 to 134,000 sq ft in 2022 (0 recorded in 2019 and 13,500 in 2020). Availability has increased to 203,000 sq ft, with 1-9 Ivyhouse Lane in Hastings accounting for over half this space, but this is far outstripped by the total logged demand of over 2.6 million sq ft.
Lewes, Newhaven and Peacehaven, saw a steady increase in rental levels, with £11.50 being the highest rent achieved in 2022. Take up was also steady at 31,000 sq ft and the vacancy rate remains low at 1.5%, equating to 75,000 sq ft. This is slightly up on the previous year, but again, demand is outweighing supply at 480,000 sq ft logged.
Similarly, in Rustington & Littlehampton, rents increase further from £10 per sq ft in 2021 to £12.50 per sq ft in 2022, and take up quadrupled to 24,000 sq ft. Vacancy remains low at 1.23%, with slightly more space available, currently, (74,000 sq ft) and demand outstrips supply, totalling over 1 million sq ft logged in 2022.
The Shoreham and Lancing area has seen a dramatic increase in rents, jumping from £9.50 in 2021 to £14.50 in 2022. Take-up increased from 54,500 to 62,500 and vacancy remains low at 1.2%. Availability stands at 40,000 sq ft and with a demand logged at 850,000 sq ft across 2022 rents should remain strong.
Finally, in Worthing demand is also extremely high with almost 1.5 million sq ft logged in 2022. Take up was slightly down to 36,000 sq ft in 2022, achieving a highest rent of £11.50 per sq ft (£11 in 2021). With just 274,000 available, more quality industrial stock is needed.
Tim adds: “Due to a number of factors, such as land prices, build costs and softening of yields, rents continue to be robust and in most locations are continuing to rise. However, the rate of increase has slowed, albeit incentives have increased marginally. Due to investment yield softening, developers are having to pre-price land purchases in order to make appraisals stack up, but many speculative newbuild schemes are continuing at pace in locations with low supply.”