Featured Sector: Industrial

Industrial construction starts increased 17% during the three months to September, and the sector’s prospects look set to improve along with the health of the wider UK economy.

During 2012 Glenigan tracked solid gains in the value of industrial projects starting on site, underlying starts were up by over 30% driven by increased demand for logistics and distribution projects. There was some strength from the more traditional manufacturing sub-sector but the weak demand for UK goods, especially from the Eurozone the country’s largest export partner, constrained growth.

Official statistics show that output of new industrial construction was 7% higher during 2012 after a sharp decline during 2011. New orders on the other hand were also promising during 2012, increasing 27% from 2011’s level; large gains were recorded in the value of orders for new factories and more limited gains were recorded for new warehouse construction.

The increased demand for logistic space that was recorded over the past three years came from distributors and online retailers. This together with the gradual strengthening in manufacturing output, has trimmed the supply of vacant industrial floorspace and lifted rental and capital values on industrial premises.

The first six months of 2013recorded a sharp turnaround in underlying starts in the industrial sector, down 37% during the first quarter of the year and falling a further 51% in the second quarter of the year. The decline seen in the first half of the year suggests that the sector went through a period of consolidation following the strong growth of 2012; the most recent Glenigan data paints a picture of returning growth in the sector.