2 July 2019

Surge in Croydon industrial units to meet huge demand

The Croydon industrial and logistics market could be about to see a surge in development. After seeing no new spec development since 2008, SHW data highlights that no less than six new schemes, totalling around 500,000 sq ft, are in the pipeline. The first, which will be completed this month, is Standard Life Aberdeen’s Affinity scheme, comprising 46,250 sq ft in two buildings on Beddington Lane, an area that, with nearby Purley Way and Beddington Farm Road, forms the south-east London borough's main industrial hub.

“Prior to building speculatively, a pre-let to Ocado had been agreed but planning permission was not forthcoming due to fears over increased vehicle movement,” says Alex Gale, head of business space, Surrey, south London and Kent, at SHW.


“This highlights a source of conflict. On one hand, Croydon is enjoying strong demand from occupiers such as last-mile delivery businesses that require modern units. But the provision of these units has raised questions about transport infrastructure in a densely built area.”


Gale argues that Croydon’s industrial vacancy rate, which hovers around 3.5% (its lowest for at least 10 years), and ageing stock mean that compromise may be needed to re-establish a healthy industrial quarter in a location where the sector has increasingly competed with retail and residential uses.


As evidence of the strength of the market, SHW recently let a former Parcelforce depot of 40,000 sq ft in Mitcham to Zafron Foods on a 25-year lease - the largest industrial deal in south London this year.


In the short term, projects in the pipeline will satisfy some of the demand. For example, the former Toys R Us unit on Purley Way has been sold by its administrators to asset manager Nuveen, which is seeking a change of use from retail to industrial for a 51,000 sq ft building.


A larger industrial scheme of 220,000 sq ft is planned by Prologis on a 10-acre site in Beddington Lane, which is expected to begin on site this year. And fellow developer Valor will soon submit a planning application for its scheme in nearby Mitcham Road for a development of 153,000 sq ft.


Two other proposals are Standard Life Aberdeen’s planned redevelopment of the Stewart Plastics site and an industrial scheme on land around the John Lewis store, both on Purley Way.


“Meanwhile, with availability currently standing at 250,000 sq ft and requirements topping 2.25m sq ft, there is an urgent need for additional space,” Gale says.


“On the back of this pent-up demand, rents have almost doubled in the last five years, with top rents of £23/sq ft being achieved for small 1,000 sq ft units and new-build rents being quoted at £15.50/sq ft to £16.50/sq ft.”


A version of this article originally appeared in Property Week June 28th - (login required).



Alex Gale

020 8662 2704

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