Dorset Industrial Market: Green shoots for speculative development in 2024?

This time last year, we predicted that the development challenges we saw at the back end of 2022 would persist into the year, as rising interest rates and build cost inflation took hold.  Yet, whilst this was the case for much of the year, we did see a good level of industrial supply delivered, nonetheless.

Some 300,000 sq ft of newly developed space was marketed in the Bournemouth, Christchurch and Poole (BCP) conurbation in 2023 – albeit from schemes which had already begun development before the economic challenges began to bite. This contrasts with just c.30,000 sq ft of newly developed industrial space delivered in 2022.

As a result, there was a 38% increase in the 5-year average take up statistics in 2023 which, together with a positive net stock absorption rate, is tangible proof that demand for industrial premises continues unabated.

This, together with a proposed industrial development pipeline which is up by 240% on the 5-year average, paints a brighter picture for the year ahead, as BCP industrial property expert, Bryony Thompson, explores.

There remains considerable demand for industrial premises across the Dorset region, but with particular focus on the BCP areas.

By the end of 2023, much-needed new industrial stock had been delivered at locations such as Bedrock Park on the Ferndown Industrial Estate, which saw c.190,000 sq ft speculatively delivered over 26 units in one phase. Completed in March, by the end of 2023, it was 50% let or under offer.

We expect this level of demand to persist throughout 2024, as occupiers continue to seek high-quality, sustainable, energy efficient industrial premises across Dorset.

Nick Turner, Director – Asset Management, Northwood Urban Logistics, explains:

“Much of our success at Bedrock Park has been in delivering a product which speaks to the needs and demands of industrial occupiers here – particularly around more sustainable premises which saw us proactively choose to install solar PV panels and EV charging points, delivering EPC ratings of A & B across the board.”

Meanwhile, by May, a brand-new speculative14,690 sq ft unit with service yard that we were marketing on the Link Estate at Holton Heath Trading Park in Poole, also completed and was let quickly.

Bedrock Park, Ferndown Industrial Estate

Supply challenges will persist

Despite these positive green shoots and the delivery of some excellent units across the region, there remains some market uncertainty which will impact the delivery pipeline in 2024, until the market rebalances.

The effect of interest rate hikes, increased build costs and high inflation, together with the prospect of a General Election later in 2024, stalled speculative development in 2023.

This will cause a supply stumbling block in 2024, with approximately 50,000 sq ft of new speculatively developed space due to start construction, which will push rents on further still in the region.

It is therefore unlikely that there will be new competing supply over the short to medium term and occupiers will feel the impact of the lack of new development this year.

However, of this supply, there will be some excellent opportunities for occupiers at locations including Magna Park which is expected to be developed out in 2024, together with eight units at Parvaneh Park, Ringwood, which will complete in February, with all units being sold off-plan.

Rents to continue upward trend

Headline rents achieved £10.50 psf in 2023 for pre-lets between 16,000-40,000 sq ft, driven by a mixture of lack of supply and high-quality, energy efficient buildings in those buildings that were delivered.

Quoting rents for pre-lets or proposed developments for 2024 have also increased and we expect to see achieved headline rents of between £11.00 by Q2 and £11.50 psf by Q4 2024.

Local Plan must deliver employment land

As interest rates and build costs stabilise throughout 2024, we are hopeful that there will be more appetite from developers to recommence speculative development in 2024, ready for occupation in 2025.

However, we still need more sites to be allocated for employment land in the BCP Local Plan, which is due to be adopted in April 2025 – subject to any drastic political changes later this year.

Provided that this happens, we remain hopeful that the industrial supply we so enjoyed in 2023, will continue to gain momentum throughout 2024, delivering much-needed industrial supply to support our Dorset occupier base into 2025.

For more information about the latest activity in the Dorset industrial market, get in touch.