According to Savills latest Big Shed Briefing, London and the South East had its best year ever for take-up of industrial warehouse space (units of 100,000 sq ft +), hitting 8.26 million sq ft (767,379 sq m) in 2020. This can largely be attributed to the significant growth of online sales as a result of the Covid-19 pandemic, with Amazon accounting for 40% of all space transacted in the region.
Savills data shows a 21% increase on the five-year average and a huge 160% jump on figures from 10 years prior, demonstrating the considerable growth in demand that has come as a result of structural shifts that have occurred over the past decade.
Key deals in London in and the South East in 2020 saw Amazon committing to 2.3 million sq ft (213,676 sq m) at Littlebrook in Kent, DHL acquiring 485,000 sq ft (45,057 sq m) at London Gateway and Royal Mail signing for 314,000 sq ft (29,171 sq m) at Magna Park Milton Keynes.
Due to the high level of transactional activity, supply has reduced dramatically decreasing 27% to 4.19 million sq ft (389,263 sq m) in the space of 12 months, with an average vacancy rate of just 3.49%. In London alone there is just 0.5 years’ worth of supply, the lowest in the UK standing at just 999,078 sq ft (92,817 sq m). This has pushed vacancy rates in the capital to 2.74%, 292 basis points below the UK average of 5.63%.
Savills notes that 2020 also continued to see a significant increase in demand for large freehold sites from both data centres and the film industry, accounting for 8% of take-up last year. Whilst positive news, this ultimately removes industrial & logistics sites from the future development pipeline.
In response to dwindling stock, there has been a number of speculative announcements from developers with 16 units now under construction totalling 2.72 million sq ft (252,696 sq m). Savills has identified eight units within the South East and a further eight within the M25, including three units totalling 238,000 sq f (22,110 sq m), 137,000 sq ft (12,727 sq m) and 101,000 sq ft (9,383 sq m) respectively at Crossways Commercial Park in Dartford, 146,000 sq ft (13,563 sq m) at London Gateway and another three units of 126,000 (11,705 sq m), 161,000 (14,957 sq m) and 249,000 sq ft (23,132 sq m) at G Park Bedford in Wixams.
Toby Green, director in the industrial & logistics team and head of London and South East, comments: “Whilst is fantastic that London and the South East continues to outperform with some significant and sizeable deals taking place in 2020, the region is now severely undersupplied as a result. The recent speculative announcements will undoubtedly help to replenish stock in the short-term, but more must be done to safeguard industrial land particularly in London. This is essential if we are to cater to current levels of demand, which at present show no signs of slowing.”
