STRONG demand for industrial units and office space in the Solent region are driving up rents, according to a recent report.

The Q4 Industrial and Office Market Pulse reports, unveiled by LSH at a breakfast briefing on Wednesday, also predicts that 2018 will be a key year for occupiers, thanks to an increase in availability resulting from the completion of several speculative developments in the area.

Notably, the number of enquiries for units in the 10,000 – 20,000 sq ft category overtook those in the smaller 5,000 – 10,000 sq ft category by 20 per cent during the quarter. LSH attributes this shift, the first of its kind in five years, to two factors – a lack of stock in the smaller category combined with occupiers’ confidence in their plans for future growth.

The report cites developments at Solent Airport at Daedalus, Lee-on-the-Solent, Alpha Park at Chandlers Ford, the South Central development at Nursling – where John Lewis has pre-let one of the three units – and Harts Farm Way in Havant as key developments that are contributing new supply.

Adrian Whitfield, director, Industrial and Logistics at the south coast offices of LSH, said: “We expect to see the supply continue to increase throughout 2017 as the current pipeline of development schemes such as Merlin Park in Portsmouth come out of the ground. We previously predicted that rental levels could reach £10 per sq ft this year, and nothing in this report has led us to change that view.”

However the shortage of office space continues and the supply available has sunk below one million sq ft for the first time in over a decade and Chilcomb Park, Winchester, is the only major development on the horizon for 2018.

Enquiry levels during the quarter were 36 per cent higher than those received in Q3.

Total take-up for 2017 finished at 295,577 sq ft, with the out of town market along the M27/A27 corridor seeing the greatest take-up.

The most active sectors were technology, media and telecoms and finance, banking and insurance.

New headline rents were achieved in a number of markets during 2017, with Trafalgar House in Winchester city centre setting a new high for the city, achieving £29.25 per sq ft.

The highest rent in Southampton City Centre was achieved at the White Building at £22 per sq ft and rents hit £25 per sq ft at Southampton Science Park’s new build office on the Benham Campus.

Andy Hodgkinson, Director, Office Advisory at LSH, said: “The record levels of rent for office space are being driven by a chronic lack of supply – there were no new offices at all built in 2017, with a 20,850 sq ft development at Chilcomb Park, Winchester, the only major development on the horizon for 2018.

“In contrast to the Industrial sector, offices, particularly ‘out of town’ ones along the South Coast, are viewed more cautiously and carefully by investors.

“Our recent experience has highlighted that robust interest exists for long and secure income type product – demand does exist for those ‘value add’ opportunities within the city centre and out of town, but interest here tends to be from investors that have strong knowledge and experience of the local market dynamics.”