The latest research indicates a notable decrease in the uptake of sizable industrial spaces in Wales during the third quarter, underscoring fluctuating market dynamics.
With nearly 340,000 square feet less space transacted than the previous quarter, the market faces a unique set of challenges and opportunities.
Overview of Industrial Space Take-up in Wales
The demand for large industrial spaces in Wales has experienced a downturn in the third quarter, as highlighted in the recent findings by global property consultancy, Knight Frank. The total activity for spaces encompassing over 50,000 square feet has notably diminished to 342,000 square feet, marking a substantial decline from the 680,000 square feet recorded in the preceding quarter. Despite this, the cumulative space transacted this year amounts to 1.35 million square feet, which aligns with the figures from 2023.
Regional Leasehold Transactions
The transactions observed during the third quarter comprised five individual leasehold agreements. Notably, three of these agreements were based in south Wales, while the remaining two were situated in the north. Among these, the most significant transaction involved the leasing of 77,000 square feet at the South Wales Distribution Centre located in Kenfig Industrial Estate, to Roche Logistics. This transaction effectively marks the full letting of the estate by Mileway.
Neil Francis, head of Knight Frank’s logistics and industrial team in Cardiff, remarked on the noticeable reduction in take-up compared to the previous quarter and year. He attributed this trend to the electoral period as well as an overall quieter summer, which collectively contributed to the market’s subdued activity.
Factors Influencing Market Activity
The current industrial property market is characterised by increased due diligence resulting in extended transaction timelines. This cautious approach adopted by both occupiers and lenders is contributing to the protracted nature of deal completions.
Headline rents for prime spaces have continued to surge, with the final 42,000 square feet unit on Phase 3, Indurent Park, Newport, achieving a new estate headline rent.
Knight Frank’s research further illustrates that the availability of large industrial units in Wales remains at approximately 5.2 million square feet, mirroring the previous quarter. Within this space, 16% comprises the former Wilko distribution centre in Magor, which is speculated to be under offer to a data centre operator.
Demand and Expansion Potential
Another significant development is the launch of the Avara Foods site in Abergavenny to the market. This site offers a substantial facility of 125,000 square feet with considerable expansion potential, sparking interest from both occupiers and investors. The competitive interest has led to an invitation for best bids, significantly exceeding the guide price, and underscores the ongoing demand for well-located freehold properties with options for subdivision and development.
In terms of secondary industrial stock, there exists a marked shortage of quality spaces in proximity to the M4. Landlords who have invested in high-standard refurbishments of their properties are witnessing robust demand, unlike their counterparts dealing with poorer quality units in secondary locations which are experiencing diminished interest and declining rents.
Future Prospects and Market Speculations
In South Wales, particular large units, including the 52,000 square feet RYB 1 in Ebbw Vale and the 105,000 square feet Unit 10 at Indurent Park, Newport, are under offer and expected to finalize transactions in the fourth quarter. These transactions indicate a persistent interest in grade A spaces despite current market challenges.
The availability of high-grade industrial spaces remains limited, signalling continued competition for top-tier properties. This situation highlights the potential for further rent increases and value appreciation in the near term.
Market analysis also reveals that ongoing developments and strategic propositions could bolster the industrial real estate landscape, offering an optimistic outlook amid current uncertainties.
Despite current challenges, the industrial property market in Wales shows enduring potential, particularly for prime spaces and strategic developments.
As the market continues adapting, stakeholders remain cautiously optimistic about future opportunities.
