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. In the South West take-up totalled 1.1m sq ft in Q4 2014, the first time for two years that quarterly take-up reached over 1m sq ft and contributed to make 2014 the strongest year on record.
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 South West, a well-documented lack of stock and land space in Bristol is illustrated by the fact that no deals above 50,000 sq ft were recorded in Bristol or Avonmouth. Only two grade A buildings, 334,000 sq ft at Crossflow and 270,000 sq ft at G Park remain. The strong competition between occupiers and lack of space has meant Bristol has the highest rents outside of London.
Philip Cranstone, Associate Director, Industrial agency at DTZ in Bristol comments: “2014 was a strong year for take-up in the South West, with a large amount of existing availability disappearing from the market. We have seen the balance of power shifting back towards the landlord, but despite this, unlike the more central regions, the South West has not seen speculative development of any scale to date. There has been some new build activity, for example Farm Foods purchasing land for 178,000 sq ft in Avonmouth, along with various examples of pre-lets in the parcels sector, but it remains to be seen whether those developers considering speculative development will take the plunge in the South West in 2015.”
