Manufacturing surge brings new factories?

Substantial changes are taking place in the industrial market as retailers and manufacturers rationalise their activities. The surge in manufacturing output over the past half year is clearly leading to a shortage of capacity as companies find themselves banging against their productive ceiling. Also, retailers are in a fiercely competitive market where cost savings are essential, hence new distribution facilities. The shortage of Grade A industrial space is becoming widespread throughout the country which is being aggravated by a lack of speculative development for the fourth quarter of 2010, said DTZ. Since then, the situation has worsened, judging from regional reports.

DTZ’s Mike Baugh commented: “The Yorkshire region, with its excellent infrastructure and labour supply, continues to be successful in attracting large scale distribution occupiers, With take up of speculatively built Grade A space continuing, and a lack of new developments, the window of opportunity for occupiers to secure significant incentives is closing. Consequently,it is likely that we will see a return to design and build leddeals.”

Take up of industrial space in the final quarter of 2010 in Yorkshire was 36,231 sq.metres (390,000 sq.ft.) bringing the annual total to 278,700 sq.metres (3 million sq.ft.). DTZ said non food retailers were dominant in 2010 with the

region pulling in national distribution hubs. “Yorkshire and Humberside also benefited from inward migration as higher rents and a shortage of supply in the north west pushed companies eastward.” The government is also giving a helping hand to the industrial property market opening up its supply chain to smaller organisations. Mike Baugh said: “The announcement that the government intends to award 25% of its contracts to small and medium sized businesses (SMEs) presents a major opportunity in the market where the supply chain has traditionally been closed to SMEs.”

He believes that this will provide a boost to the Yorkshire market “which in a number of areas is performing well, with supply becoming limited. It is likely to encourage demand and possibly a return to small scale speculative development.”