Demand for industrial property in Oxfordshire has soared, according to a report from Savills. The office and industrial sector survey has found industrial take-up in 2010 stood at 707,845 sq ft, 22 per cent ahead of the five-year average.

Andrew Parker, director at Savills in Oxford, said: “In the region, most industrial deals are made up of smaller units taken by local occupiers.

With a continued demand for this type of product, the city is well placed to soak up the current available space on the market and there is already a supply shortage in the 50,000 sq ft to 100,000 sq ft bracket as we go through 2011.”

According to Savills, deals at the smaller end of the market, below 20,000 sq ft, dominated take-up, accounting for 86 per cent of transactions in 2010.

Only 15 per cent of industrial deals in the first three quarters of 2010 were Grade A, compared to a five-year average of 30 per cent.

The report notes that of the 3.2 million sq ft of industrial space currently on the market in Oxford, almost 40 per cent comprises units above 100,000sq ft and 52 per cent of this supply is clustered around Didcot.

The larger floorplate sector remains exceptionally competitive, with a variety of 100,000 sq ft distribution buildings up against a much larger pool of competition.

This has inevitably created a two-tier market, with smaller units starting to see an upward pressure on rental growth.

In the office market, Savills admitted 2010 was a “tough market” confirms take-up has remained stable in 2011 and the firm predicts it will reach 150,000 sq ft by year end.

Quality stock in out of town locations has proved more robust than in-town properties.

Current vacancies include the 70,000 sq ft Leafield Technical Centre (pictured), the former home of the Arrows Formula One team.

As with the industrial market, take up was dominated by smaller units with 69 per cent of deals being done for space that was below 10,000 sq ft.

Significantly, a success story over the last year has been the Eastpoint Business Park in Oxford where strong demand for managed office space was highlighted and rents have risen from £9.99 per sq ft to £15 per sq ft.

But the report indicates that the 82,000 sq ft British Gas Business building recently given planning permission on the Oxford Business Park will significantly boost the office take-up figure this year.

Nick Berrill, head of commercial agency at Savills in Oxford, said: “Demand will no doubt remain subdued as we continue through 2011.

“But our research indicates there are a number of latent requirements that we expect to come to fruition.

“This means the market needs to act now to ensure the supply of Grade A space will be able to meet these needs. In our view, those landlords that offer flexibility will be most successful, with serviced office space and short-term leases attracting occupiers.”

Clare Bailey, associate director in Savills research department, added: “In the long term, the changing nature of the employment structure for the county is likely to have an impact on the demand for commercial property.

“Encouragingly the financial and business services sector is set to experience a net increase in employment levels over the next ten years which reports are suggesting will be in excess of 22 per cent. This will have a positive impact on the long-term demand for office space in Oxfordshire.”