The South Yorkshire and North East Derbyshire region saw a solid uplift in development activity during the third quarter of this year in response to the occupational demand across the sector.
South Yorkshire and North East Derbyshire saw 3.1 million sq ft of speculative space under construction (Units over 50,000 sq ft) across 16 units.
West Yorkshire and the Humber saw a much-needed boost in speculative activity in the same period with 607,500 sq ft of space under construction (units over 50,000 sq ft), spanning across six schemes, with three more now underway.
In total for region, occupier take-up year to date 2022 totals more than 3 million sq ft, 2.2m of which has come from South Yorkshire and North East Derbyshire, whilst the severe lack of immediately available grade A and new stock has restricted transactional activity in the West Yorkshire region despite continued occupier demand.
Rental growth in West Yorkshire was just ahead of prime annual rental growth at 11 per cent, compared to a new high of 10 per cent in the south of the county.
The figures, highlighted in Knight Frank’s LOGIC report, which profiles occupier and investment market trends across the region and sector highlights the developer response underway to address the supply constraints.
Commenting on South Yorkshire and North East Derbyshire, Rebecca Schofield, partner and head of Yorkshire Industrial at Knight Frank, said: “There is a good demand for newly developed space.
“The third quarter of 2022 recorded 915,900 sq ft of take up in the region (units 50,000 sq ft+), bringing the total for the year to date (YTD) to 2.2 million sq ft.
“Take up in Q3 was largely boosted by one significant deal; transportation and freight services company, Maersk, signed a 15-year lease on the newly-built Mammoth 602 in Doncaster, comprising 602,000 sq ft of space. Distribution occupiers remain the most active, accounting for 47% of YTD occupier activity.
“Reflecting the strong demand for new, high quality space, almost half of take up so far this year comprises new, speculative buildings, while a further 32% are build-to-suit units.
“Demand for prime units in South Yorkshire & North East Derbyshire continues to support rental growth.
“The South Yorkshire & North East Derbyshire industrial market has witnessed a solid uplift in development activity during Q3 2022. There remains a shortage of immediately available space in the region.
“Availability has declined by 12% on an annual basis, to stand at 1.2 million sq ft at end-September (units over 50,000 sq ft). This brings the vacancy rate for the region down to 2.1%, from 2.5% in Q3 2021. However, the pipeline of new development coming through should alleviate some of this supply-side pressure next year.”
Developments in South Yorkshire include Catalyst in Sheffield, Panattoni Park in Rotherham, where a letting has been agreed; Barnsley 340 which will provide 340,400 sq ft of space, 5 units are on site at Horizon 29, while PLP have broken ground on four units totalling 605,500 sq ft at Bessemer Park, Sheffield. All are due for practical completion next year.
Prime rents in Sheffield are 10% higher than last year (units over 50,000 sq ft) and Knight Frank expect rental growth to continue as new developments come forward.
Commenting on West Yorkshire and The Humber, Iain McPhail, partner in the Yorkshire Industrial team at Knight Frank in Leeds, said: “Speculative development is gathering momentum.
“The West Yorkshire & the Humber industrial market saw a much-needed boost in speculative development
activity during Q3 2022. At the end of September, 607,500 sq ft of space was under construction speculatively (units over 50,000 sq ft), spanning across six schemes, with three commencing in the third quarter.”
Developments included UBS Velocity Point in Leeds, Howden 62 in East Riding also commenced, providing 86,808 sq ft of space, while Tungsten’s 230,000 sq ft Super B and 4th Industrial’s two unit development, both at Interchange 26, Cleckheaton are also well underway and close to practical completion.
Iain added: “Despite the wider economic outlook, the occupational industrial market is showing continued robustness with requirements remaining at strong levels.
“The issue in the region is the distinct lack of options for occupiers. Neighbouring South Yorkshire has enjoyed just under 1 million sq ft of take up in Q3 and has 3.1 million sq ft of new speculative space under construction, showing that if there is available space, the demand is there.”
Iain added that vacancy rate remains persistently low. “Availability remains an issue for occupiers, particularly in the large and new-build market. The volume of immediately available space declined by 17% in Q3 to stand at 1.3 million sq ft (units over 50,000 sq ft), all of which comprises second-hand stock, mostly grade B & C, while there are no units over 250,000 sq ft available for larger occupier requirements. This results in a sub 2% vacancy rate.
“Low supply continues to influence take up levels. Q3 2022 recorded just 192,500 sq ft of take up in West Yorkshire (units over 50,000 sq ft), as the shortage of stock continues to hamper the occupier market. Consequently, take up in the year to date (YTD) totals 808,200 sq ft. Second-hand units make up 93% of YTD leasing activity, with just one unit taken on a build-to-suit basis.
“Quarter three saw just two transactions, namely the 140,000 sq ft Dianthus House unit in East Riding and the 52,000 sq ft Astonish House warehouse in Bradford. Distribution firms remain the most active this year, accounting for 58% of take up.
“Industrial rental growth across the region continues to be underpinned by the supply/demand imbalance, leading to new quoted headline rents on units being speculatively developed.“
