Yorkshire’s logistics sector could be facing a return to speculative development due to lack of regional supply, according to new research from property firm CBRE. The firm predicts tough competition from occupiers for the limited number of deliverable sites in key locations across the region as new requirements emerge.
Almost 550,000 sq ft of industrial space was acquired in the first half of 2014, double the amount let during the same period last year. The 413,000 sq ft acquisition by Great Bear Distribution of LLP Sheffield earlier this year boosted the H1 take-up and this combined with several significant deals at the end of last year such as M&S taking 626,000 sq ft at SIRFT and Wren Kitchen’s 801,350 sq ft purchase at Barton-Upon-Humber resulted in the 12 month period ending June 2014 being recorded as the most active since the start of the downturn in 2007 with take-up of 3.96m sq ft.
The take-up of existing stock has resulted in a sharp fall in supply levels across Yorkshire, down 48% over the 12 months to June 2014, standing at just 2.14m sq ft. Occupiers are facing limited choice across all unit sizes and supply is most severely limited in Leeds and along the M62 corridor around Wakefield, Normanton and the M1 interchange. Any major requirement in the market for space of 300,000 sq ft upwards is increasingly having to consider Design & Build options.
Senior Director of Industrial Agency at CBRE Leeds, Mike Baugh, comments;
“The sudden shift into a low supply environment has triggered signs of speculative development in the region, however this activity is focused on units below 100,000 sq.ft in the Leeds area. This new build activity is likely to attract a good level of interest, as occupiers struggle to identify quality options in the current market. It will be interesting to see who is first to look at speculative development in excess of 100,000 sq ft, but rumours in the market suggest that this isn’t far off.”
Baugh states that the strong take-up levels have been compounded by improvement in new requirements considering the region, the largest at present associated with a major fashion retailer, looking for over 500,000 sq ft in the Wakefield area. He continues;
“We are also seeing improved levels of enquiries from third party logistics providers, and budget retailers. For now, prime rents along the M62 corridor remain at £4.75 per sq ft but demand levels are such that rental growth is now just on the horizon.”
CBRE’s research outlines that the year to date has also seen encouraging news for the region’s manufacturing base. At the forefront was the confirmation of investment by Siemens and Associated British Ports into Green Port Hull, which will include both a new offshore wind turbine factory and blade factory on the Humber Estuary. This new facility is expected to see a substantial supply chain become established in the wider region, akin to the supply chain that has emerged in the North East associated with the Nissan plant at Sunderland.
