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 take-up in the East Midlands was the highest on record with 5.8m sq ft taken up.
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 commented: “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.
In the East Midlands, logistics company Norbert Dentressangle was very active, taking two grade B buildings totaling just under 1m sq ft at the Royal Oak Industrial Estate in Daventry. Developers are gaining in confidence and consequently a number of schemes in Northampton, Daventry, Derby and Chesterfield are currently under construction, which will add 1.2m sq ft of grade A space to the market.
Gemma Constantinou, Senior Surveyor in DTZ’s Industrial agency team comments: “2014 was a strong year for the East Midlands, we not only had the largest deal of the year occurring in the region (1.1m sq ft warehouse in Thrapston taken by a non-food retailer) but take up was the 3rd highest on record with just less than 5.8m sq ft.
“The levels of take-up have boosted developers’ confidence with more developers now committing to speculative schemes adding much needed grade A stock to the market. The current level of Grade A stock shortage has had a positive effect on rents and we are observing the power balance shift from the tenants back towards the landlords.”
