The West Midlands industrial market is poised for continued rental growth over the next five years, according to Savills latest Big Shed Briefing.
Savills rental growth forecasts predict a robust 4.8 per cent annual growth over the next five years in the West Midlands for the industrial sector for units over 100,000 square feet.
The research also notes that, following an uptick in available supply at the beginning of 2023, supply levels have remained stable and there are currently 27 units over 100,000 square feet available in the West Midlands, totalling 6.04 million square feet.
The region currently lacks any available units over 450,000 square feet.
“Throughout the course of 2023, we witnessed a resurgence in occupier interest, despite prolonged decision making timelines associated with larger strategic investments.
“Undoubtedly, the West Midlands has solidified its position as a hub for logistics and manufacturing space, characterised by resilient prime rents that have weathered challenging market conditions. We expect this positive trend to continue for the foreseeable future.”
Of the available stock, 25 per cent is Grade A speculatively developed space, 45 per cent is Grade A second-hand space, 20 per cent is Grade B space and 10 per cent Grade C space. Despite an increase in supply, the vacancy rate remains in line with the long-term average of 5.98 square feet - this is equating to 0.94 years' worth of supply based on the five-year annual average take-up.
In 2023, take-up reached 3.68 million square ft across 19 transactions, a 23 per cent decline from the long-term average.
Savills notes that one of the reasons for the decline is the lack of large units which were available during the period. Economic pressures have also led occupiers to shift away from the build-to-suit route, with only 26 per cent of transacted space being built-to-suit compared with 47 per cent in 2022, 15 per cent speculatively developed, and 59 per cent second-hand.
The report notes that the diversity of occupiers taking space in the West Midlands remains mixed, with manufacturers accounting for a third of all transactions, followed by third party logistics providers at 25 per cent and grocery retailers at 18 per cent.
Looking ahead, the West Midlands has a promising development pipeline, with 14 units under construction, totalling 2.89 million sq ft, spread across various size bands.
Christian Smith, Industrial and Logistics Director at Savills Birmingham, adds: “Our latest Big Shed Briefing indicates a thriving industrial landscape in the West Midlands, with the anticipated rental growth set to drive economic expansion over the coming years.”