21 September 2018
Industrial Rents - How occupiers are being forced out of Central London

The London commercial market has witnessed steady rental growth over the past few years across all sectors including office, retail and industrial. Perhaps the most notable increase in rents over the past 5 years has occurred in the industrial sector, especially in those sites closer to the centre. Land values have resulted in a huge loss of industrial land, in favour of alternate uses, primarily residential close to the river Thames. The result is a huge displacement of industrial occupiers, who are being forced away from the centre, not only by development, but also by huge increases in rents. As an example, a number of properties close to the A2 (Old Kent Road) have seen a doubling of rents over the past 5 years and a sharp fall in yields as developers and investors look to capitalise on a market which until now had been viewed as rather static.

As the displacement of occupiers continues, traditional industrial heartlands such as around the Old Kent Road are steadily becoming development zones for residential, primarily due to the planned extension of the Bakerloo line. As occupiers are forced further away from the centre, a number of north Kent towns are seeing an influx of new occupiers, which in turn is having an effect on rents in those areas.

It would appear the local government are aware of the problem and there are a number of residential led schemes across London where the developer is required to replace the loss of industrial space with an equivalent amount in the new scheme, effectively “sheds and beds”. How this mix of occupiers works is yet to be seen, however as the housing needs of the capital continue to rise, it seems that more and more industrial occupiers are being pushed further away from the centre.