South East market ‘slow’, but Heathrow provides hope

Economic clouds are making transactions difficult in the UK’s industrial property letting market, but the Heathrow sub-market is showing some positive signs.

Letting activity in the UK logistics market fell in the second quarter of 2011, as caution spread throughout the UK in reaction to the latest macroeconomic news. DTZ’s latest Property Times UK Industrial Q2 report 2011 shows that occupiers are inclined to place decisions on hold as uncertainty over the economic climate, including the revision of the UK outlook, dictated caution.  The report also says that whilst there was a substantial drop in activity from the previous quarter from 6.9m to 5.6m sq ft, the number of transactions was broadly similar. The reduction in the average deal size resulted largely from a change in profile of occupiers, as manufacturing occupiers who typically take smaller units than logistics users, were more active in Q2.

Tunde Adegbemile, DTZ Head of London and South East Industrial and Logistics said: “Letting activity in the south east was particularly subdued with take up dropping by up to 70% on the previous quarter, mainly due to the pace of transactions slowing. We experienced broadly similar levels of enquiries for a similar period from 12 months ago, however, as the economic outlook continues to look uncertain, securing commitment from decision makers continues to be a prolonged affair.”

Tunde Adegbemile added: “The Heathrow and west London markets tend to provide a good indicator for the greater London and south east market, and there are some indicative signs of confidence becoming more established, with some speculative development activity likely to commence in the second half of the year.”

There are good prospects of increasing take-up activity during the second half of 2011 with a substantial quantum of space under offer. Tunde Adegbemile concludes: “From a logistics perspective, demand activity continues to be dominated in the main by the food retail sector, although there are signs of improving activity from the health and pharmaceutical sector.”

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