The value of North West industrial investment property deals fell by almost a third in 2022 compared to the year before but remains well above the 2020 figure and the five-year average, according to specialist agents B8 Real Estate.
Its latest Market Update also shows that while rising interest rates and economic conditions led to a fall in demand from investors in the second half of the year, demand from occupiers has remained strong and rents continued to rise.
B8RE’s research shows there were 66 investment deals totalling £900m in 2022 – down 31% on the record year of 2021 but still ahead of the five-year average of £868m. Lettings in ‘big box’ units (those over 90,000 sq ft) totalled around 6m sq ft, slightly down on the previous year’s figure of 6.2m sq ft but still well above the five-year average of around 5m sq ft.
While industrial land values have halved from over £2m per acre at the peak of the market to around £1m per acre now, rents have continued to rise, with ‘big box’ units now commanding £7.75 to £8.00 per sq ft – 10% higher than in 2021 – and mid box units now achieving record rents of over £10 per sq ft.
Steve Johnson, joint head of the agency team at B8RE, said: “Occupier demand remained consistently strong throughout the year, particularly for new build which accounted for over 80% of overall big box take-up. With the ongoing lack of supply, a significant proportion of speculative units were let prior to practical completion, setting new headline rents in both prime and grade B locations.
“We expect occupier demand to remain robust, hindered only by the limited development pipeline. As a consequence we expect big box rents to break through the £8 per sq ft barrier in the year ahead.”
Simon Wood, who leads the investment team at B8 Real Estate, said “2022 was a year of distinct halves. While the first half was strong, the second half saw huge volatility with prices reducing dramatically. However there is still a significant amount of capital backing the industrial property market and the strength of demand from occupiers, as well as the potential for strong rental growth, is helping to bolster confidence.
“We did see signs of a return in demand towards the end of the year, which is continuing tentatively into this year. Despite the difficult economy, the fundamentals of the industrial property sector remain strong.”