New industrial building gathering momentum

New industrial building construction stands to be one of the major beneficiaries of falling interest rates over the coming months as developers press ahead with schemes that become viable thanks to lower finance costs.

The latest Glenigan Index suggests the pace of activity in the industrial building sector may already be picking up. Industrial building project starts rose by 45% in the three months to August, compared to the previous quarter, even if they have yet to match last year’s levels.

It comes after encouraging Glenigan figures showing that main contract awards were worth £1,725 million in the three months to July, up 12% on the previous quarter and 22% higher than in the period a year earlier.

Recent activity in the sector has been boosted by the start of work on a £60 million development of four industrial building units in Hillingdon, in west London (Project ID: 23186879).

Significant industrial building projects

But Glenigan data shows that there are other significant projects, particularly for new logistics-related schemes, where construction work is set to start in the coming months.

For example, tenders are currently being invited and work is set to get underway in the months ahead on Logistics City Milton Keynes. Kier Property Developments is the client on the £15.33 million scheme which will involve a major unit of over 11,400 sq m and where work is set to run for nine months (Project ID: 17104655).

Meanwhile, construction work on a £31.95 million scheme of industrial & logistics units at Watchmoor Park in Camberley for Anglesea Capital is at the pre-tender stage and pencilled in to start before Christmas. Detailed plans have been granted on a scheme of almost 30,000 sq m of space (Project ID: 23168673).

Elsewhere, tenders are being evaluated on a £24.4 million scheme of four warehouse units at Reading International Logistics Park for client Advanced Research Clusters and involving some 4,000 sq m of space (Project ID: 20074415).

Construction work is also set to start on some major logistics projects in regions beyond the South East.

Tenders have recently been returned on a £30 million warehouse scheme at Drum Industrial Estate in Chester-le-Street in County Durham. Clients Arbucc (Drum) and Buccleuch have been granted detailed plans for the scheme involving a large B8 logistics warehouse with industrial building and ancillary space and parking/landscaping, covering more than 11,500 sq m of space. Work on the scheme across a 4.4-hectare site is set to start at the turn of the year and run for 12 months (Project ID: 22227821).

Amongst manufacturers, luxury car makers are investing in new industrial buildings. Bentley Motors, based in Crewe, has been granted detailed plans for a £6.53 million integrated logistics centre. Work on the project involving over 5,200 sq m of space is due to start later this year and run for 12 months (Project ID: 23210969).

Meanwhile, construction work on a £76.2 extension of Rolls-Royce Motor Cars headquarters near Chichester in West Sussex is set to start before the end of this year. It involves five new industrial buildings for manufacturing and ancillary uses, across almost 42,000 sq m of space (Project ID: 23008550).

Rise in valuations

Recent messages from major developers in the sector also bode well for new construction activity. In July, David Sleath, chief executive of Segro, the country’s largest industrial property developer, said valuations for UK industrial space had stabilised and the group was seeing the first increase since the cycle turned in 2022.

Segro made capital expenditure on development of £211 million in the first half and expects it to reach £500 million for the full year.

One Segro industrial building development where detailed plans have been granted and work is due to start later this year is a £42.8 million development of 18 industrial units at SEGRO Park, Rainham in south London. The scheme is at the pre-tender stage and work is set to run for 11 months (Project ID: 22383397).