The East Midlands has helped reap a record first half for the Big Box Industrial & Logistics market in 2018, with the region contributing to 45 per cent of the overall take-up figures for Grade A floorspace in the UK.
Key deals in the East Midlands included XPO for Nestle’s 637,000 sq ft at East Midlands Gateway, one of a number of large transactions across the UK, creating the 12.3 million sq ft high in the first half of 2018, 90 per cent higher than the second half of 2017 (6.5 million sq ft) and 38% up on H1 2017 (8.9 million sq ft).
The success of the East Midlands explains why supply of Grade A floorspace now stands at just 2 per cent, compared to 14% in the West Midlands.
James Keeton from the Nottingham offices of real estate experts JLL said: “There is large disparity between supply and demand in the region, which is not only attracting a lot of investment from UK based propco’s, but also from the USA in particular and some from Asia, keen to invest in speculative schemes coming forward.
“We’re hearing a lot from American companies interested in the compelling stats for the East Midlands, showing a strong occupational market, with demand from logistics companies in particular. This is in response to the continued growth of online retail, with retailers currently accounting for 34 per cent of demand.
“With a weak pound and stronger dollar, they’re getting a lot more bang for their bucks in the UK and the East Midlands stands out for demand driven by its strong connectivity to the rest of the UK and lack of key employment sites.”
Keeton continues: “Rents are rising too in the East Midlands with borders for the ‘golden triangle’ being redrawn. We’re seeing £6.25 in the region against a previous rate of £6.00, with the higher rents of £7.00 psf in the West Midlands pushing further north.”
The rate of interest shows no sign of slowing down either, with the sector’s outlook remain strong.
“We expect to see sustained robust investor demand in the second half of this year as the industrial & logistics markets continues to outperform other major commercial assets.”
With over 4 million sq ft of logistics space in the UK currently either under offer or expected to complete in the short-term, take-up this year will potentially be around the 20 million sq ft mark, which would be above the five-year annual average.
Keeton concludes: “With more speculative development taking place nationally we also expect to see a change in the take-up of new space, with speculative product eating into the dominant built to suit (BTS) share. Based on our monitoring of the supply pipeline, we expect speculative development to continue to rise, including larger units. We’re already seeing evidence of this with Henry Boot proposing a new big box scheme”
