2022 was a year of two halves – one which saw the industrial development market in its prime during the first six months of the year – ‘hot property’ for both investors and developers.
However, by the end of 2022, a combination of interest rate hikes and build cost inflation hit land values.
Whilst we may have turned the page on 2022, some of the development challenges we saw in the last quarter of the year, will persist into 2023. So, what does the year hold for the Bournemouth, Christchurch and Poole (BCP) conurbation in industrial property terms?
Our Bournemouth industrial agents explore what occupiers, landlords, investors and developers can expect – the core message being that alongside potential challenges, there will also be opportunities. We enjoy a broad range of industrial stock in the BCP area – from high-quality new stock to lower cost second hand assets, but the main problem for the Dorset region is the supply Vs demand dynamic.
Historically, the conurbation, and in particular Poole, has suffered from a limited supply of employment land.
In recent years, the majority of speculative industrial development has been restricted to small unit schemes. These have always been very successful both on a freehold and leasehold basis, because of the high proportion of SMEs within the local economy.
However, speculative development of units in excess of 10,000 sq ft has been limited, which is feeding the supply/demand imbalance here.
Supply will remain a problem
The shortage of industrial stock that we experienced throughout 2022 and previous years will remain a problem into 2023 and beyond.
This is because occupier demand continues to outstrip built and available industrial supply, with pipeline supply also affected by some developers putting speculative development on hold due to build and funding costs increases.
Ultimately, this will prolong the shortage of supply we are already experiencing, so occupiers can expect to see an increase in rents on existing built stock this year.
However, timely delivery of the new 187,528 sq ft industrial scheme at Bedrock Park, Ferndown Industrial Estate, should alleviate some of the supply pressure with the units due to complete early in 2023. Nearly 45,000 sq ft of this scheme has been pre-let prior to practical completion, demonstrating the demand for high-quality units.
Despite some new development coming through, we are aware of occupier requirements which still cannot be fulfilled in the BCP conurbation due to a lack of appropriate stock, including a handful of mid-sized warehouse requirements (30,000 sq ft plus) where business owners are struggling to identify suitable properties.
An employment land shortage is exacerbating the issue, with delays to the Local Plan compounding the situation.