The demand for large industrial spaces in Wales experienced a notable decline in the third quarter of this year, with a decrease of nearly 340,000 sq ft compared to the previous quarter.
- The total take-up for spaces over 50,000 sq ft reached only 342,000 sq ft, significantly lower than the 680,000 sq ft recorded in Q2.
- Despite the quarterly decline, the total activity for the year remains comparable to 2023, with 1.35 million sq ft transacted so far.
- All of the transactions in the third quarter were leasehold deals, with the majority occurring in South Wales.
- Experts attribute the slowdown to various factors including electoral periods, a quieter summer, and more cautious due diligence processes.
New research from global property consultancy Knight Frank reveals a marked reduction in the uptake of large industrial properties in Wales for the third quarter of this year. The specific sector concerning industrial spaces over 50,000 sq ft reflected a total transaction volume of 342,000 sq ft, a stark contrast to the 680,000 sq ft reported in the preceding quarter. Yet, despite this downturn, the overall yearly figure mirrors 2023’s performance, with 1.35 million sq ft of space traded so far.
The Q3 transactions were characterized solely by five leasehold agreements, predominantly centered in South Wales. Notably, the most significant letting involved a 77,000 sq ft space at the South Wales Distribution Centre to Roche Logistics, culminating in the full lease of the estate by Mileway.
Neil Francis, leading the logistics and industrial team at Knight Frank in Cardiff, expressed concerns about the reduced take-up, citing the election period and a generally subdued summer as contributing factors. “Increased due diligence from both occupiers and lenders is extending deal timelines, adding complexities to transactions involving industrial properties exceeding 50,000 sq ft,” Francis stated.
Despite these challenges, the market has observed a rise in headline rents for prime spaces. The remaining 42,000 sq ft unit in phase 3 of Indurent Park, Newport, has been leased at a newly set high estate rent.
Further insights from Knight Frank indicate that while the availability of large industrial units in Wales remained unchanged at approximately 5.2 million sq ft, a significant portion of this includes the vast 850,000 sq ft former Wilko distribution center in Magor. Several desirable large units, including the 52,000 sq ft RYB 1 at Ebbw Vale and the 105,000 sq ft Unit 10 at Indurent Park, Newport, are currently under offer, with transactions expected to finalize in the fourth quarter.
Looking forward, Knight Frank has launched the Avara Foods site in Abergavenny, a 125,000 sq ft facility with considerable expansion potential, already attracting considerable interest. There is a noted demand for freehold properties that allow for subdivision, refurbishment, and development, evidenced by the strong interest and anticipated over-value sale of the Avara Foods site.
An identified shortage of high-quality secondary industrial stock, especially near the M4 corridor, presents a challenge. Though refurbished units witness high demand, those of poorer quality in secondary locations are experiencing a decline in interest and rental values.
The industrial property market in Wales faces challenges amid decreasing demand, yet retains growth potential with escalating prime rents and strategic developments.
