Exclusive: LHR could face warehouse crisis with third runway

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London Heathrow faces a drastic shortage of industrial land with the coming of the third runway, a leading property agent is warning. This week, MPs approved the new runway for the major UK hub.

However, Canada-based global commercial real estate services organisation Colliers International’s head of industrial and logistics Len Rosso warns that the resulting increased traffic and business around LHR could drive up industrial rents near the airport even higher.

“Industrial land values and rents are already at record highs around Heathrow, well in excess of £3.5 million per acre and £16 per square foot, respectively,” he says. “The positive outcome from Monday’s vote on a third runway has removed any uncertainty regarding development and it is likely to help propel demand and rents to even more stratospheric levels as occupiers adapt to the increased traffic flowing through the airport,” he continued.

“I have deep concerns that the industrial sector will quickly find itself incredibly challenged by the severe lack of suitable land and the dearth of speculative space in the development pipeline.” Rosso says that in the face of increased demand, landlords may look again at the possibility of two storey warehouse units. However, the industry was slow to take to SEGRO’s X2, a two-storey warehouse development close to the southern runway.

Another possibility is creating warehouse space underground, such as that planned at Rectory Park in Hounslow, but Rosso adds the costs are significant and the market appetite for this type of space hasn’t yet been tested.

“We need to find a way to ease the development pipeline pressures and I urge local councils and planners to work closely with industry to deliver a smart and strategic industrial development plan around Heathrow,” Rosso adds. This could entail reassessing nearby green belt land which has “strong potential” to be converted for industrial use.