DTZ, a UGL company has released the findings of its Property Times UK Industrial Q3 2012 report which covers the market for properties over 50,000 sq ft. The report revealed that take-up of grade A space rose nearly 7% in Q3, the first quarter-on-quarter rise for nearly 18 months. As a result of strong grade A take-up, the availability of prime space eroded and fell nearly 7% to 15m sq ft.
Overall, take-up in the quarter fell 30% to 5.6m sq ft across 44 deals, the lowest level since Q1 2009, reflecting occupiers’ preference for the best buildings. Total availability rose 1.3% to 142m sq ft, the first quarter-on-quarter rise in nearly two years, as a number of secondary units came to the market across the UK.
The report found that many occupiers have turned their attentions to freehold and leasehold build-to-suit deals in order to satisfy their requirements due to a lack of suitable grade A stock. As a result, bespoke take-up rose 54% to 1.2m sq ft, accounting for 22% of total take-up.
DTZ Research also found that the profile of occupiers had changed considerably from Q3 2011, with retail demand falling from 51% to 10% whilst demand from manufacturing increased by 41%. However, the reduction in take-up by retailers is expected to bounce back over the forthcoming quarters.
Regional proportions of grade A space remain at historically low levels, with over half the regions grade A space constituting less than 10% of total availability. The North West and North East retained their status as the regions with the lowest amount of available grade A space.
Mike Baugh, Director, Industrial agency at DTZ in Leeds commented: “Q3 has seen an encouraging increase in Grade A take up with 2 excellent deals for the Barnsley area. With further deals likely to complete in Q4 supply of existing large warehouse space in the Yorkshire region will reduce to sub 3m sq ft, circa 75% of which is in the South Yorkshire region. ”
In Yorkshire & Humberside, take-up comprised two grade A lettings in Barnsley totalling 360,000 sq ft. Ellbee took 205,000 sq ft at Nexus 36 and Galpharm Pharmaceuticals took 155,000 sq ft at Elmhirst Park. Grade A availability in the region fell to 3.4m sq ft, the majority of which is split between South and West Yorkshire. As most enquiries are focused in West Yorkshire, particularly around the M62 corridor, occupiers are turning to grade B stock to satisfy their requirements.
Industrial investment volumes fell in Q3 2012 to £435m across 38 transactions which is nearly 50% below average and the lowest volume for two and a half years.
Ben Burston, Head of UK Research at DTZ comments: “The industrial market is polarised, with very strong demand for multi-let grade A product with lengthy unexpired lease terms. Demand for secondary product, on the other hand, is subdued given widespread caution over the occupational market. The scarcity of stock meeting investors preferred criteria is impacting on overall investment volumes.”
