News

16 November 2017

Has Industrial Demand in Surrey & South London Peaked?

New research from independent property advisers SHW highlights a faltering level of enquiries from industrial occupiers across Surrey and south London in the fourth quarter of this year. Is this symptomatic of a greater malaise entering the industrial market or simply a slight pause for thought?

SHW data shows total requirements for industrial property fell to 385,000 sq ft in October contrastingwith a high this year of 1.55m sq ft in May. Although demand has fluctuated over the last 12 months, the overall downturn in enquiries in the last quarter, relative to the yearly average, does indicate an element of uncertainty entering the market. This may be partly due to the recent election result but, more likely, occupiers are delaying decisions until Brexit issues are resolved.


Alex Gale, Head of Business Space for South London, Surrey and Kent at SHW, comments: “Despite a tailing off in enquiries, the last three months have been exceptionally busy in terms of deals being completed. The underlying market dynamics haven’t changed, with availability at an historic low of sub- 4% and headline rents for smaller industrial units hitting a new high of £22 per sq ft."


“An equally buoyant freehold market has resulted in prices reaching £220 per sq ft as record low interest rates mean more occupiers and investors are looking to property as their long-term savings and pension plans. Meanwhile, interest in South East industrial investments remains very healthy with numerous funds and propcos seeking access to this market.”


Across SHW’s main centres - Croydon/Coulsdon, Mitcham/Sutton, Redhill/Reigate andEpsom/Chessington – overall availability this year has fallen to a total of 560,000 sq ft - the lowest it has been since 2009. Total take-up for 2017 currently stands at 425,000 sq ft (compared with 670,000 sq ft for the whole of 2016).


The shortage of stock may depress take-up as occupiers, frustrated by the relatively limited choice, adjust their plans – although this is more likely among those seeking larger facilities. More than a third (36%) of the requirements noted by SHW are for units of 5,000 sq ft or less, with just one in five seeking industrial buildings of 20,000 sq ft-plus. The largest unit currently openly available in the area is around 40,000 sq ft at Marlowe Way, Croydon, with two parties showing interest.


The only new builds on the horizon are two units of 20,000 sqft each, due to be built by Aberdeen in Beddington Lane, Croydon, which are at least nine months away. This will be the first new development in Croydon since 2008 and is an example of brownfield redevelopment as opposed to new greenfield development. The latter remains scarce amid continuing pressure on land availability from housebuilders and alternative uses.

 

Alex Gale concludes: “Whether the lower enquiry levels continue in the next few months and into the new year will be key for the future buoyancy of the industrial market. In recent years, it has been one of the strongest sectors as it continues to benefit from strategic changes in the retail market.”

 

Contact: 

Alex Gale

agale@shw.co.uk

020 8662 2704


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