Dwindling grade A supply hampering some locations
Demand across Yorkshire has focussed heavily on grade A stock, with almost double the amount acquired than the previous year; 31% of overall take-up was focussed on grade A. Despite this, total take-up fell to 7.4m sq ft in 2012, a drop of 27% on the previous year and its lowest level since 2007.
However, only 8% of the stock now available on the market is grade A, which is largely comprised new build logistics units over (100,000 sq ft) across South Yorkshire, where there is currently an oversupply.
Robert Whatmuff, Head of Industrial and Logistics in the North, said: “The lack of stock is holding back the market and occupiers of small and medium sized units are struggling to find any suitable space to accommodate their future plans. Occupiers now have very limited options, with no speculative development occurring over the last few years and the flight to prime mentality in terms of recent occupier requirements.
"This has left us with less than one months supply of small to medium grade A accommodation. In the larger size ranges this is less of an issue as there remains a strong supply of Grade A units over 100,000 sq ft, particularly in South Yorkshire. We have witnessed an increase in Design & Build from those occupiers with more bespoke requirements however, for the smaller occupier this is generally not an option that is palatable or deliverable.”
Prime rental values increase, but take-up will be constrained in 2013
Despite the 27% fall in take-up, every major centre across Yorkshire* registered growth in prime rental values. We expect to see this trend continue as the majority of markets see a reduction in quality stock, but demand still exists.
Predicting what lies ahead, Robert said: “There is already a shortage of choice for occupiers and, due to the lack of speculative development, occupiers will struggle to find suitable properties either in terms of location or specification. Consequently, Design and Build opportunities will need to be considered; the likes of which have already been seen at Woodhouse Link in Sheffield where Home Decor has recently taken occupation of its new 110,000 sq ft bespoke manufacturing and administrative facility.”
'New dawn' approaching as speculative development looks set to return
In certain key locations where there is a demand for stock there are signs that we will see speculative development this year. There is a recognised shortage of grade A accommodation in the region, with availability falling 44% to 3.4m sq ft – its lowest level since 2008. Ed Norris, Industrial and Logistics Agent in Sheffield, added: “Recent take-up of prime space suggests we are fast approaching a new dawn. Whether it be the onset of speculative development or a trend towards high quality refurbishment of existing stock, it is clear there is strong demand for quality product in the right locations.”
* Centres covered include Doncaster, Rotherham, Sheffield, Hull, Bradford, Leeds and Wakefield.