The lack of grade A industrial space across Yorkshire and the North East has led to a slow-down in overall take-up, with the reduction of stock leading to a fall in investment volumes of 18%, according to our latest research, Industrial Market Review H1 2013.

Drop in industrial investment volumes

In a review of the first half of 2013, results showed that that total industrial investment across Yorkshire and the North East stood at £69.59m, compared to £85m in H1 2012.

Notable transactions included Tritax’s purchase of The Range at Nimbus Park in Doncaster for £37m, a UK investor’s purchase of Maplin Distribution Warehouse at Brookfields Park in Rotherham for £11.5m and Valad Europe’s purchase of the Micheldever Unit at Lowfields Business Park in Leeds for £5.57m.

Rapidly diminishing supply of space for smaller occupiers

Despite a good supply of large, grade A warehouse and logistics facilities over 100,000 sq ft in the region, LSH has calculated that there is less than one month’s supply left of the traditionally more sought after smaller sheds.

Robert Whatmuff, Director and Regional Head of Industrial and Logistics agency for the North, said: “We have reached a critical tipping point where we need new developments on site to ensure that SME and mid-box occupier demand can be met. There are several large-scale distribution units on the market, but we have little to offer those occupiers seeking any units less than 100,000 sq ft. It’s a dangerous situation as businesses that want to expand or move into the region will have no choice but to look elsewhere for existing buildings.”

Government intervention

The Government has recognised that the development market is stalling and has introduced an incentive whereby all newly built commercial property completed between 1 October 2013 and 30 September 2016 will be exempt from empty rates for the first 18 months.

Whatmuff added: “Strong demand for speculative development coupled with the new Government initiative should go some way to kick-starting development. We would hope to see new facilities springing up in hotspots across the region over the next 12 to 18 months.”

Strong investor demand in the regions

Ben Roberts of the Capital Markets team at LSH said: “There is strong investor demand in the regions with a focus on high quality industrial investment opportunities. The challenge facing investors is the continuing lack of stock, which has led to a highly competitive market for the right assets.”

Click here to read the review in full.