Record price as industrial land sells at £2m an acre

Russell Mogridge is the lead partner for agency at property consultancy Vail Williams in the Solent region
July 4, 2022
Booming demand for industrial land has seen record values achieved in the Solent region of Hampshire.

Property consultancy Vail Williams, acting on behalf of a private owner, sold 4.5-acre Hilsea Industrial Estate, Portsmouth, for £9m to a commercial property developer.

Equivalent to £2m an acre, the price of land has nearly doubled since pre-pandemic values of £750,000 to £950,000 an acre.

Russell Mogridge, a Vail Williams partner who leads the firm’s industrial team in the UK from the South Coast region covering Dorset, Hampshire and West Sussex, said: “The value of industrial land, particularly where there is opportunity to build more units on the same footprint and increase annual rental income, continues to rise to record levels here in the Solent region.

“Industrial estate values are being driven upwards here by a shortage of industrial property, such as warehousing, to support ‘doorstep’ supply chain logistics driven by thriving e-commerce sales across the UK and abroad.

“In some cases, industrial land is eclipsing the value of residential housing development sites – it is very much a seller’s market and there may be some way to go yet before the top of this particular market is called.”

Russell added: “New buyers of industrial land in this booming industrial market still have plenty of upside in the long term. These include rental income growth from additional new units and existing tenants and investment yield compression because a successful track record over future years will show it is a less risky investment to the next buyer.”

Russell advises that business owners should seriously consider locking into rents now as he predicts 10%-plus rental rises over the coming year.

“Whilst construction costs are currently running high, due to 40-year record inflation, industrial land investors are also looking well beyond the current economic challenges.

“Another factor is that companies want high-quality industrial workspace for their staff – it is a recruitment and motivation attraction that canny employers understand.

“They are aware that there are more jobs than people these days, with fierce competition for talent, and the look of a premises could be the difference between a great candidate staying or walking out.

“All of these reasons, along with Brexit and the post-pandemic business bounce back, have created the conditions for a boom in demand for industrial land and buildings, with prices nearly doubling since just before the pandemic.

“It is because of this incredible confluence of macro-economic conditions that we advised the owner to sell the asset, resulting in best bids only and a subsequent purchase price of £9m.”

Hilsea Industrial Estate, which dates to the 1960s, is home to a number of blue-chip occupiers such as Lidl, Dulux and the Range.

The 4.5 acres have been purchased by Fiera Real Estate and Wrenbridge, with plans to develop a multi-unit Grade A industrial scheme with a gross development value (GDV) in the region of £33m.

GDV is the forecast revenue or sale that is anticipated from the completed development scheme.

Vail Willliams with joint agents CBRE will be marketing the new units, available to let for occupation in 2023.

The Solent region is home to 42,000 businesses, the port cities of Portsmouth and Southampton and is regarded as the UK gateway to European and global markets.