A return of speculative industrial development

At the start of this year I looked at the amount of industrial floorspace speculatively under construction for our ‘UK Industrial Property Trends Today’ report and found that nationally there was less than 750,000 sq ft of industrial space being built speculatively as at February 2013.  But with economic activity and business sentiment improving, I decided to take another close look at the market to see whether the level of speculative industrial development has changed significantly. It has – roll on eight months and there is now over 1.7 million sq ft of industrial space speculatively under construction, over double than when we last recorded at February 2013.

This total includes four ‘big box’ distribution units of 100,000 sq ft and over, which is a significant change for the market as there has been virtually no new speculative development in ‘big box’ units since the onset of the recession.  Along with the four ‘big box’ units under construction there has also been a pick-up in speculative development of smaller units.  Most regions currently have at least one new scheme speculatively under construction and, based on my analysis of schemes in the pipeline, I’m expecting to see further announcements in the coming months with even more space being built.

So what does this mean for the industrial market?  Well firstly this development is bringing some much needed new prime stock to the market which will be able to satisfy growing demand.  And, secondly, it’s a sign that confidence is returning to the market.  At the pre-recession property market peak (mid 2007) there was around 15.5 million sq ft of industrial space speculatively under construction, however when the recession kicked in this dried up, particularly in the ‘big shed’ market.  But with a few ‘big box’ units now under construction and a pick-up in development of smaller units this points to a sign that not only confidence but market fundamentals have improved.