Industrial occupier take-up in the UK for the first half of 2018 has soared past 2017 according to the latest figures from CBRE. Take-up for the first half of 2018 (at 17.4M sq. ft. in 51 deals) exceeded the whole of 2017. The North West region achieved a market share of 7%, impacted by the lack of availability of modern units over 100,000 sq ft, which forced companies to seek logistics space outside their preferred locations.
The first six months of the year in the North West region reported take-up of 1.5m sq ft of logistics space. Furthermore, just below the standards of 100,000 sq ft for big-box reported, there are several large requirements still circulating, but still not satisfied.
Online retail has formed an important part of logistics take-up in the North West in recent years, with numerous rapidly growing companies in the sector being formed in and around Manchester. So, it is surprising that the region has not yet benefited from take-up from this sector during 2018, with some e-commerce companies reportedly exploring Design to Suit (DtS) solutions to meet their large requirements.
Royal Mail signed for two units at Mountpark Omega Warrington and also at Stakehill Industrial Estate Middleton comprising over 450,000 sq ft. Meanwhile, other major occupiers decided to commit to DtS developments including Movianto’s 360,000 sq ft at Haydock and manufacturer Tiger Trailers with a new 165,000 sq ft unit in Winsford, Cheshire.
A strong second half of the year is anticipate, with almost 1.4m sq ft of deals already under offer and some companies in talks to sign for a new building on a DtS basis. The need to go down this route is a response to the lack of Grade A stock which has led developers such as Mountpark and First Panattoni to speculatively develop big box units in core locations where demand from occupeirs remains strong.
Paul Cook, Senior Director, CBRE’s Industrial team in Manchester said:
“Despite being seriously constrained, the supply situation in the market is showing signs of improvement with a number speculative units being built, but still not enough to absorb the demand. Nonetheless, there was 3.1m sq ft of Grade A logistics space available at the end of H1, i.e., less than the long term annual take up. The good news is a further 2.35m sq ft is under construction which is as a result increased investor and develop activity not just from the UK but overseas thus highlighting the attractiveness of the North West region.
“As a result of the supply situation, good secondary locations are starting to compete with the best prime locations in the region. The knock-on effect would mean locations such as Warrington, Trafford Park and Airport City could become “super-prime”. The fact that Mountpark in Warrington has been able to let their principal speculative unit months before it was finished could convince more developers to advance development plans. Meanwhile rents have again increased in the region, with prime rents well above £6 and getting closer to £7 per sq ft,” continued Paul Cook.
Nationally, in terms of occupiers’ preferences, the first six months accentuated the trend towards new build space, relegating secondhand space to only 20% of the total national space acquired.
The rest of acquired space was principally build-to-suit and another key trend is the growing size of requirements with XXL warehouses (exceeding 500,000 sq ft) accounting for almost half of the total take up, a proportion never seen before. This trend has also encouraged developers to start building speculative XXL schemes against for the first time in almost a decade.
