property


Haslams’ Industrial Property Snapshot Records tumble


The industrial market in the Thames Valley since my last note in The Business Magazine in the summer continues to outperform, writes Neil Seager, partner at Haslams Chartered Surveyors


Notable industrial lettings in the region since the summer include:


• SAS International signing on a 44,000 sq ft pre-let at Suttons Business Park, Reading.


• DHL agreeing a pre-let of 100,000 sq ft at Exton’s Island Road site.


• Argos leasing Unit B Island Road (73,000 sq ft) for a returns and delivery centre.


• Volvo Cars and Trucks leasing 12,500 sq ft and 30,000 sq ft at Prosper Park and Worton Grange respectively.


• Panther Warehousing leasing 35,000 sq ft at 1 Eastern Road, Bracknell.


There are also a number of lettings which are close to going through and will add to what we predict will result in 2017 being one of the highest ever recorded for take up in this sector in this region. Rents unsurprisingly have hit record levels with the historic psychological £10 per sq ft barrier now a distant memory.


What does this all mean? Well it means that occupier’s choice is narrowing to a very small number of units across most size ranges. Indeed, in some size ranges there is no choice. The reasons for this spike in demand are well documented from the growth of e-tailing to the positive impact on manufacturing as a result of the weakened pound. When the market wobbled around the time of Brexit we were all told that the best barometer of business performancce was the FTSE 250. Unlike the FTSE 100 it was more UK focused. Readers will be interested to note that on Friday, November 3 the FTSE 250 reached a record closing high. You can draw your own general conclusions from this news. The industrial property market reflects this positivity in the stock market and has the resilience in it to withstand a slowdown unlike the other property sectors.


Investors are certainly taking this view with the aforementioned DHL unit rumoured to be selling to Equities Property Fund, a South African REIT for £29 million which reflects a circa net initial yield of 4.25%. This


Construction workloads rise but skills shortages remain


Workloads in construction and infrastructure in the South East continued to rise in Q3 2017, according to the latest RICS Construction and Infrastructure Market Survey, with 14% more respondents seeing a rise in workloads of the quarter, with a steady pace of growth. However, while activity in the South East remains steady, comments left by respondents continue to highlight Brexit-related uncertainties as weighing on investment decisions, and the lack of sufficiently skilled workers also remains an obstacle for many businesses.


Skills shortages have been a long-running issue and now the intensification of labour shortages is biting once more with contributors, nationally, citing this as an impediment to growth. Respondents to the survey are still seeing a lack of quantity surveyors (63%) as well as other professionals (54%) across the South East. 46% are also seeing a shortage of workers with specific trades, all hampering growth.


Despite government efforts to bolster THE BUSINESS MAGAZINE – DECEMBER 2017


the workforce and the prominence of apprentices, through an apprenticeship levy introduced earlier this spring, only 42% of respondents, nationally, feel that government-funded programmes are moderately effective, with one-third unsure. The quality of the talent pipeline is insufficient as well – less than half (45%) of employers who currently hire apprentices view them as a long-term solution to their hiring needs.


Breaking the rise in the South East’s workloads and activity down to sector level, the most growth is being seen in the infrastructure and public non-housing sectors, while remaining broadly stable elsewhere. In infrastructure, 22% more contributors reported a rise rather than a fall in workloads, with a net balance of +19% in public non-housing. Across the South East, respondents expect the rail, road and energy sub-sectors to post the most significant increases in construction output over the coming 12 months.


Despite uncertainties, a net balance of


38% of respondents in the South East also expect activity to continue to rise rather than fall over the next 12 months. Meanwhile, 27% more contributors expect employment to rise rather than fall (broadly unchanged from Q2).


Nationally, while a shortage of workers is hampering activity and profit margins, financial constraints are still reported to pose the most significant challenge, although the share of contributors expressing this view has come down to 69% (from 79% in Q2). Access to bank finance and credit remains by far the most frequently cited financial issue, followed by cashflow and liquidity. This likely reflects a more cautious stance by banks given cyclical market conditions and Brexit considerations.


Higher input costs and a shortage of labour continue to restrict growth in profit margins, with a net balance of only +12% of respondents, nationally, expecting a rise in margins over the coming year.


businessmag.co.uk 29


Winter 2017


yield would be a UK record for an industrial property forward funding transaction.


For further advice on the industrial property market contact Neil Seager:


0118 9211516


neilseager@haslams.co.uk haslams.co.uk


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