2014 was a record breaking year for industrial take-up, with 23 national and regional records broken according to the latest figures from DTZ. Total UK take-up reached 32.6m sq ft over 2014, the highest since 2010, driven largely by improving economic sentiment and retailers expanding their logistics networks in response to the growth in online shopping.
DTZ Research’s Industrial Property Times report for H2 2014 also revealed that a record 14.8m sq ft of grade A space was taken over the last 12 months.
2014 also saw the re-emergence of speculative development in response to the lack of available grade A space, with 9.1m sq ft taken through build-to-suit deals, double the 2013 total. Developers are largely building storage and distribution facilities and targeting locations with good access to the road network.
Take-up was strong for manufacturing (8.8m sq ft), logistics (6.8m sq ft) and retail sectors (12.7m sq ft). Jaguar Land Rover was the most active individual firm in the market in 2014, taking three buildings totaling 673,000 sq ft across the West Midlands. The largest deal of the year was a build-to-suit of over a million sq ft at Thrapston in the East Midlands.
Industrial prime rents are beginning to increase nationally, given the rise in activity and low level of grade A availability, which is driving competition between occupiers. Investor demand was strong in 2014, resulting in a record £6.1bn transacted in total. The largest investment deal of the year was Legal and General’s acquisition of the Ocean Portfolio, a prime, multi-let, industrial and logistics portfolio of 12 assets across the UK including Fradley Park in Lichfield, for £226.5m.
Michael Green, Research Analyst at DTZ, says: “Looking ahead to 2015, the need for speculative development will continue with more schemes across the UK set to be announced. We also anticipate high levels of take-up in 2014 to be maintained over the next five years as industrial output increases and occupiers look to increase their UK footprint, although continued difficulties in the Eurozone may have a dampening effect.“
The West Midlands was the best performing region of 2014, achieving higher annual grade A take-up than any other region and a record take-up volume overall.
Simon Lloyd, National Head of Industrial and Logistics at DTZ, says: “Take-up of grade A buildings at increasingly high levels is giving further encouragement to landowners to construct buildings speculatively in order to satisfy some of the pent up demand. The increase in speculative building over the last 12 months has been significant and we expect this trend to continue in 2015.”
Grade A availability in London, South East and East increased to 3.8m sq ft in Q4 with 10 speculative grade A developments brought to the market over the course of 2014. Many areas of the region are still active with substantial speculative development, including Thames Gateway, Heathrow and Park Royal with a total of 1.7m sq ft currently under construction. Total take-up reached 4.8m sq ft in 2014 driven by a number of large retailers, including Waitrose, Asda, Sainsbury’s and Tesco expanding their networks.