With strong levels of activity in Surrey’s industrial market along with a flight to quality premises, more supply of Grade A stock is needed, according to UK Property Forums partner, Vail Williams LLP. Maria Hoadley, a partner specialising in industrial property based at the firm’s office in Woking, explains.
When industrial occupiers think about a place to locate their business, they may not automatically think about Surrey, but perhaps, with a little more investment in stock here by landlords, they could and should.
Having seen some 210,000 sq ft of industrial space let since January, spanning more than 30 deals, and well above the 10-year average of 120,000 sq ft, we are starting to feel a sense of buoyancy here once more.
The majority of deals were transacted in Guildford, Camberley and Farnborough for smaller units of less than 10,000 sq ft.
This is because existing occupiers in the Surrey industrial market are SMEs, start-ups or family-run businesses with smaller requirements. In fact, the average size of unit let in Surrey this year is approximately 7,000 sq ft.
But that’s not to say that larger occupiers don’t want to locate to particular towns across the county. The question is, what are the gains for firms that base themselves here?
The benefits of Surrey as an industrial location
Industrial locations such as Chertsey, Staines, Egham, West Byfleet, Weybridge and Woking all benefit from extremely good transport links – be it access to Heathrow Airport or the M25.
They also have the additional bonus of being located outside of the ULEZ zones which can be so expensive for logistics operators located nearer to Heathrow.
Alongside these benefits is the fact that Surrey industrial stock is also competitively priced, particularly when compared with its nearby Thames Valley or Heathrow counterparts.
Competitive industrial rents in Surrey
We see a good churn of enquiries for industrial space here, particularly in the sub-10,000 sq ft category as that’s where the market is. However, that’s not to say that warehouse units of 50,000 sq ft and above won’t let, if priced at the right level.
Whilst prime industrial rents here have risen by five per cent in some cases, sitting at around £25.00 per sq ft for Grade A stock closer to the M25, most available stock can be leased for sub-£18 per sq ft.
The challenge for the Surrey industrial market is the dearth of quality Grade A stock available on the market here.
Demand for ESG-activated stock outweighs supply
Occupiers increasingly want environmentally friendly buildings on sites which are both accessible and powered-up. However, supply of ESG-activated stock remains limited.
Weybridge, Byfleet and Staines tend to attract larger, ESG-focused occupiers that are more logistics and manufacturing orientated.
Prologis has just delivered 124,223 sq ft of logistics space in Weybridge. Brooklands DC1 provides occupiers, seeking a manufacturing and distribution facility, with a rare opportunity at a world renowned manufacturing and logistics location. Again, this site boasts EPC Rating A+ and BREEAM Excellent credentials to meet occupier needs, with a clear internal heigh of 12.5 metres.
Meanwhile, in Byfleet, we are marketing a 10,000 sq ft unit at Chertsey Industrial Estate, with an EPC Rating of B.
Woking, Guildford and Staines have the opportunity to attract more SME occupiers, owing to the smaller scale of units they are able to cater for.
Causeway Park in Staines is delivering some much-needed Grade A supply. At just a six-minute drive from Heathrow Airport and situated close to both rail and road transport, Causeway Park offers larger occupiers the chance to locate in high-quality units targeting EPC A+ and BREEAM Excellent ratings.
Causeway Central will bring four highly sustainable premises to market. Unit 4 is already available to let, meanwhile Units 1-3 will come to market in 2025.
In Chertsey, Vail Williams is marketing Chertsey Industrial Park where achieved rents sit at £21.50 per sq ft owing to the quality of the units, the EPC A rating and three-phase power supply. A unit is currently under offer here and other smaller units available of between 3,202 sq ft and 6,598 sq ft.
Meanwhile, in nearby Egham, Vail Williams is sub-letting a 16,878 sq ft industrial unit at Unit 4 Thorpe Industrial Estate, Alpha Way. And at Coulsdon, Vail Williams is marketing a newly refurbished 25,000 sq ft unit targeting £16.95 per sq ft with joint agents Cushman & Wakefield.
This will be the most interesting standalone industrial unit of a substantial size in the area, in an extremely prominent location with little comparable supply in the surrounding area.
Mind the industrial supply gap
Thanks to the challenges of the last 18 months where build costs reached eyewatering levels and the general political and economic landscape made industrial development more questionable, there is now an industrial supply gap within certain locations in the Surrey area.
This is particularly true for quality units in the sub-10,000 sq ft category which boast the ESG credentials necessary to attract occupiers.
Vail Williams’ message to Surrey industrial property landlords is that there is absolutely demand here.
If you have a secondary or tertiary asset and have invested in it to deliver a quality product back to market, with EPC ratings of B and above and BREEAM ratings of Good or Excellent, your asset will let and at strong rental levels.
For industrial occupiers seeking a value-for-money location in the South East, Surrey should be on your geographical radar, particularly if you want to be close to the M25 and/or Heathrow Airport, but don’t want to pay the rents that come with locating at Heathrow.
Meanwhile, for those developers that have been trying to make viability stack up and will need to see land values and development costs level out a little more in order to take that next step here, the message is: if you build it, they will come.
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