According to Savills’ latest Big Shed Briefing, take-up of industrial & logistics space (units of 100,000 sq ft +) hit 16.4 million sq ft (1.542 million sq m) in the first half of 2018, a 25% increase on last year’s figure and 33% above the long term average. Demand has once again been underpinned by online retail activity with occupiers in the sector accounting for 28% of all transactions.
This increase has led to a slight drop in supply, falling from 28.4 at the start of the year to 27.8 million sq ft (2.638 to 2.582 million sq m) in H1 2018. However, at present Savills is tracking over 9.4 million sq ft (845,417 sq m) of speculative development across 49 units due to be delivered in 2018/19. This is the highest level recorded for more than 10 years as developers continue to capitalise on the popularity of the sector.
Across the UK, the East Midlands has had a record half year with take-up of more than 4 million sq ft (371,612 sq m), nearly double that of H1 2017. Key transactions in the region have taken place at East Midlands Gateway where four build-to-suit deals have been agreed, totalling nearly 2 million sq ft (185,806 sq m). Elsewhere, in both the South East and Yorkshire, more space has been transacted in the first half of the year than in the whole of 2017 with large land sales in Bedford to B&M and Aldi, as well as Clipper Logistics taking 615,000 sq ft (57,135 sq m) in Sheffield, the largest deal for a second hand unit this year.
Kevin Mofid, head of industrial research at Savills, comments: “As we head in to the second half of the year the current pace of take-up is on par with 2016 levels, the best year on record for industrial take-up. With this in mind, there are still a number of large unfulfilled requirements in the market, which stands us in good stead for another stellar year.”
Savills notes that in 2018 to date 55% of all occupier demand has been related to the retail sector, up from just 25% in 2017, which demonstrates that many retailers are continuing to reorganise and restructure their supply chains as they grapple with structural changes to shopping habits of the UK consumer.
Similarly, the manufacturing sector continues be active accounting for 15% of all space transacted in 2018. Depending on the outcomes of Brexit talks with the EU on future trade agreements, there is the possibility that manufacturers will aim to keep more inventory in the UK, which could translate into more demand for warehouse space.
Richard Sullivan, national head of industrial & logistics at Savills, adds: “What’s clear is that the retail sector will continue to influence the future of our market. Online retailers have a large part to play, but across the spectrum businesses will wake up to the importance of having a strong supply chain. What’s more, as we head closer to Brexit it will be interesting to see how this might impact the sector, in particular when it comes to demand across the UK.”