Britain’s distribution and retail sectors are continuing to outperform many of the more traditional property markets, according to the latest figures from consultants Knight Frank.
In its latest logistics and industrial Occupier and Investment Market Commentary the firm claims that despite occupier demand driving take-up, manufacturing output “remains flat” while the distribution and retail sectors recorded a 2015 second quarter growth of 4.5 per cent.
“Supply shortages continue to leave occupiers with a lack of choice,” explains the report. “In the big-shed market, new-build supply of units above 100,000 sq ft currently stands at 8.4 million sq ft — down 70 per cent from its peak in the first quarter of 2008.”
Across the UK the half-yearly returns are showing some stark contrasts:
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London and the South: Take-up across the region in units of 50,000 sq ft or over totalled 3.73 million sq ft, up 10 per cent on the second half of 2014. The number of transactions also increased from 26 to 36 over the same period. However, the average size of transacted units was down from 130,000 sq ft between July and December last year to 95,000 sq ft in 2015.
- Midlands: Following an exceptionally strong second half to 2014, take-up of units over 50,000 sq ft slowed to 4.5 million sq ft in the first half of this year. However, if 2014 is excluded, take-up this year is nine per cent above the five year average. The retail sector was the main driver of activity between January and June, accounting for approximately 43 per cent of the total take-up, while demand from the automotive sector increased to 12 per cent of total take up.
- North East: Take-up of 50,000 sq ft plus units in the first half of the year marginally increased from July to December, 2014; totalling 1.1 million sq ft, with an increased number of transactions rising from 10 to 13. The first half also saw the completion of two of the region’s largest deals by floor space: Lancaster Wines, purchased the 225,738 sq ft warehouse formerly owned by Morrisons in Gateshead, and Sunderland City Council acquired the former 225,000 sq ft Littlewoods warehouse.
- North West: The first half of 2015 saw take-up for units over 50,000 sq ft reach three-million sq ft, a 13 per cent increase on the final six months of last year — the highest half-yearly take-up since 2013. This was mainly due to the significant rise in occupier-led enquiries which emerged towards the end of 2014.
- Scotland: Following the Scottish referendum and the significant fall in the price of oil during the second half of 2014, take-up of units above 50,000 sq ft across the country reached 556,000 sq ft. This was down 44 per cent on the 2014 January to June figure and was also the lowest take-up since 2011. After periods of relatively strong occupier activity the Scottish market has cooled, with only seven transactions involving units above 50,000 sq ft so far this year.
- South West: Take-up for units above 50,000 sq ft across the region reached 1.36 million sq ft during the first six months of this year, more than double that of 2014’s July to December figure and 27 per cent higher than the same period last year. However, there remains a number of unsatisfied 300,000 sq ft plus requirements totalling almost three-million sq ft.
- South Yorkshire: The first half of 2015 has remained positive. The depletion of existing stock has resulted in a critical shortage of good quality accommodation. Currently, there is only 500,000 sq ft of good quality units over 100,000 sq ft available in South Yorkshire, with 380,000 sq ft under offer.
- West Yorkshire: Take-up in West Yorkshire for units above 50,000 sq ft reached one-million sq ft, representing a 60 per cent reduction from the last six months of 2014. This trend follows a period which has seen take-up decline since July 2014.
- Wales: The first six months of this year witnessed continued good levels of activity for units over 50,000 sq ft with approximately 800,000 sq ft transacted, which is a similar level to that achieved in H2 2014.
In conclusion Knight Frank predicts that: “Given the lack of available industrial space we anticipate further rental growth across all UK regions over the next 12 months.
“We also expect to see substantially more speculative development delivered to the market over the coming years, with the rate of rental growth slowing as new speculative development comes through and supply increases.”
Source: Knight Frank Press Release
