As we reported yesterday, commercial property market activity in Yorkshire is growing as investors seek opportunities in the regions. Transactions so far this year in Yorkshire and Humberside are already showing signs of outstripping the entire 2013 total, according to Jones Lang LaSalle (JLL).
But while rental deals and investments across the UK are expected to continue growing over the next four years, an acute shortage of commercial stock in both northern counties could slow the region’s recovery. A situation heightened, claims JLL, by last year’s 69 per cent increase in industrial take-up over 2012 and which has put a “serious squeeze” on demand.
“The region is facing an acute shortage of good quality stock and even though we are seeing selective instances of speculative development, it will not satisfy demand,” explained Richard Harris, a director at LaSalle’s Leeds office. “All the indications are that build to suit will also become more prevalent over the next 12 to 24 months.”
The shortage is not just restricted to the industrial market. Across the UK as a whole, the company says it expects to see a dramatic increase in speculative office development. There is currently some 2.1m square feet of floor space speculatively under construction, including a number of “big box” projects and smaller multi-let units which will help to boost dwindling levels of Grade A stock. And in Yorkshire, JLL says, a strengthening market is creating opportunities for speculative development, particularly as there is no longer any Grade A offices available in Leeds.
There are several factors, however, contributing to the upturn in Yorkshire, most notably a rising confidence in the economic recovery. There is also increasing evidence of re-shoring in the manufacturing sector, overflow demand from the Midlands and North West, and the general changing nature and restructuring of the distribution sector.
“Demand has been an improving element since the second quarter of 2013 and continues to be robust throughout Yorkshire for units under 100,000sq ft,” Harris added. “Negotiations are moving in the landlord’s favour with incentive packages beginning to harden and headline rents starting to see upwards movement, particularly where product is modern.”
JLL says that the big shed market — warehousing and distribution units in excess of 100,000sq ft — remains active. The demand is largely driven by the retail sector and focused on key sites in established locations. The manufacturing sector is starting to generate more demand, although this remains mostly below the 100,000sq ft mark.
