Yorkshire industrial market specialists at Knight Frank reflect on an unprecedented take-up of 8.3 million sq ft of logistics and industrial space transacting during the first half of 2021.
Take-up has been dominated by Distribution and Retail accounting for 85% of all transactions. Third-Party Logistics occupiers have been most active accounting for 48% of all transactions, closely followed by retailers with 37%.
The most active occupier was Amazon who continued impressive growth in the region by taking space totalling over 2.8m sq ft which included notable transactions at Wakefield 515, Knottingley (513,000 sq ft), both units at PLP Wakefield (311,000 sq ft) and a 2m sq ft multi-tiered facility at Wakefield Hub.
Other active occupiers included 3PL Geodis who acquired Trebor’s 411,470 sq ft Gateway 4 speculative warehouse in Doncaster; Clipper acquired 336,000 sq ft at Sheffield 336 and 3PL Advanced Supply Chain expanded its Yorkshire operations by taking a new 346,000 sq ft warehouse at PLP Smithywood, Sheffield.
Rebecca Schofield, Head of Yorkshire Industrial at Knight Frank said: “The industrial and logistics sector has continued to thrive with take-up figures for the first half of 2021 hitting unprecedented record breaking levels of transactions amounting to around 8.3m sq ft in the region.
“Occupier demand has remained robust with enquiry levels running ahead of pre-covid levels.
“We saw a spike in enquiries across all size ranges in H1 2021 with a significant increase in the number of larger enquiries 250,000 sq ft plus, compared to historic levels. These larger requirements over the last six months have become more footloose in order to identify suitable space/sites, particularly those focussed on existing accommodation.
“Demand has continued into H2, although we expect take-up to be lower influenced by the ever dwindling availability of existing units.
“The Covid-19 pandemic has accelerated the adoption of online retail platforms and demand for home delivery. Online sales accounted for 28% of retail spend in 2020, up from 19% in 2019, and in the first five months of 2021, this rose to 32%.
“We expect that now lockdown has been lifted the proportion of internet sales will decline, however e-commerce and home delivery services will continue to play a much bigger role in the retail market than they did pre-pandemic, bringing further changes in retail supply chains.”
The Yorkshire industrial market holds strong appeal for the e-commerce sector as its geographical position means much of the UK population can be reached within 4.5 hours drive time.
Rebecca added: “Supply levels are now critically low with less than six months’ supply of standing stock (50,000 sq ft plus) and a further 303,000 sq ft under construction. Furthermore, there is significant interest in much of this space already.
“There will be a developer response to this lack of supply with several speculative developments already in for planning and set for delivery during the course of 2022.”
Iain McPhail, Partner at Knight Frank, based in Leeds, added: “The impetus for new development is clear, yet shortages of building materials and rising build costs are impacting development timelines. Construction materials’ costs have increased sharply as supply chains struggle to keep pace with demand.
“Developers are having to reconsider their construction programmes to take account of longer lead times for certain materials, particularly cladding. Some are choosing between starting work later to match the later delivery of cladding and other steel products or adopting a stop-start construction programme.
“As a result of the continuing demand for space, we have seen rents rise in the region with further growth expected to be
achieved towards the end of the year and into 2022.
“Drivers of demand will be availability of space, access to labour, availability of power and, of course, location.”
More than half of all property investment into the Yorkshire and Humber region has targeted the logistics and industrial sector this year, with a total of £361 million, compared with £706 million across all sectors, according to Knight Frank.
“Overseas investors have accounted for just a quarter of the total spend in the region so far this year, down from around 38% of investment in 2020″ added Nick Wales, partner in the Sheffield office of Knight Frank.
“UK institutions have been acquisitive in the region in 2021. The favourable online retail market and robust occupier market are also attracting new sources of capital to the UK logistics market. Investors that have traditionally focused on retail and office are increasingly seeking to diversify their holdings and tilt their portfolio towards logistics.
“The largest single asset transaction in the region so far this year was Aberdeen Standard Investments’ forward funding of a 779,000 sq ft Next distribution centre in South Elmsall for £110million.
“Some UK Institutional investors such as British Land recently announced a shift in their strategy, seeking to target fulfilment and urban logistics.”
