Bristol Spotlight: Strong Performance for the Industrial Sector in the South West

Posted by Colliers on 16th November 2021 -

Supply for industrial and warehouse units nationally is at all time low levels, and this trend is no different in the South West. 

Though take-up in the region has remained consistent, supply of stock is reducing at a significant rate.

In Bristol, we had a total of 545,324 sq ft and 18 acres transacted across 42 deals in the third quarter of this year, which mainly consisted of smaller multi-let transactions. There were a few mid-box deals, however there was a notable absence of any larger transactions which has hindered take up this quarter. Furthermore, the shrinking availability of standing stock is continuing to hamper take up in Bristol, so whilst these headline figures look underwhelming on paper, it’s important to note that the statistics only reflect the lack of supply, not a lack of demand. In fact the shortage of stock is causing occupiers real headaches trying to satisfy their requirements.

Whilst take up was down this quarter, we are still 22.3% ahead of the previous year, where we recorded 1,592,442 sq ft at this juncture in 2020, compared to 1,947,715 sq ft in 2021, so this is still a marked contrast.

Demand and supply constraints

Behind these statistics two themes can be identified. Firstly, the caution that was being shown by some companies a year ago has been replaced by active requirements for a range of industrial and logistics space across the South West, all of which are urgent and need to be satisfied as soon as possible. This is predominantly on the back of the e-commerce market and retailers acknowledging that the uplift in online retail is here to stay.

Secondly, there has been a rise in speculative schemes, reflecting increasing confidence on the part of developers, albeit there will be a lag while these are being built, hence the current existing stock shortage, which will continue to put pressure on rents.

The strength of the South West industrial market can also be seen in headline rents for the region across all size ranges. To date this year, they have continued to rise as landlords have taken advantage of the supply and demand dynamic and therefore stayed steadfast in their position over the rents achieved. Any good quality, prime stock under 10,000 sq ft is now achieving in the region of £9.50–9.75 per sq ft. Mid-box units (20–50,000 sq ft) are up at around £8.00–8.50 per sq ft and larger units over 100,000 sq ft are anywhere between £7.00–8.00 per sq ft, even up to the larger 300,000+ sq ft units.

Race for industrial space

While Bristol has traditionally been a hotspot for industrial space – and continues to be so – we have also been seeing rapid success in other regional locations such as Bridgwater, Exeter, Gloucester and Swindon, that have all performed well in the first three quarters of the year in their own right. So far this year, Colliers has acted jointly on a number of disposals, notably the pre-letting of 107,660 sq ft of high-tech accommodation to Oxford Instruments Nanotechnology Tools at the Central Approach scheme being speculatively built by Trebor Developments and its partner Hillwood. 

Looking ahead to the to the end of the year, we anticipate that the market will continue to go from strength-to-strength as there is a race for space, however this could be held back by the level of supply, which currently running at sub 3.5 per cent of the total stock in the market, so we could see a further pinch on rents until stock levels are replenished by new speculative stock coming through – assuming they are not let before practical completion!