Dreaded industrial space glut keeps landlords on edge

Rents will fall in 2016.

Owners of warehouses and other low-specification industrial facilities will have a tough time raising rents next year, on back of an expected sharp spike in space supply.

According to a report by Fitch, around 7.7% of overall warehouse space is currently under construction and is expected to enter the market next year, which will keep rents depressed in the near term.

"Vacancy rates for warehouse properties improved in 3Q15, but are undermined by the spike in supply in 2016. This, and the lacklustre global economy, should keep 2016 rental reversions flat, or marginally negative" Fitch said.

Meanwhile, rents for business parks and single-user factories should fare better thanks to higher demand and lower upcoming supply.

"High-spec assets have less new supply coming up in the near term, and also have better demand than low-spec space. Furthermore, based on industry estimates, a majority of business park supply is pre-committed, which reduces the impact on rents from new supply for this asset type," Fitch said.

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