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Research - 27/02/2013

Take-up in industrial and logistics market hits 10 year low

Take-up in the UK industrial and logistics market fell to 76.1m sq ft, a fall of 25% on last year, reaching its lowest level in almost a decade, according to our latest research report, Industrial and Logistics Market 2013.

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Read the full Industrial & Logistics Market 2013 report here.

Grade A demand up, but dwindling stock hampering some locations
Market demand has focussed heavily on grade A stock, with 11% more being acquired than the previous year; 30% of overall demand was focussed on grade A, but only 10% of the stock now available on the market is grade A.

Steve Williams, Director of Industrial and Logistics, 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. In the larger size ranges this is less of an issue as these more sophisticated occupiers are prepared to enter a build to suit project, however for the smaller occupier this simply is not an option that is palatable or deliverable.”

SMEs cause take-up to fall by 50%
The most significant downturn in activity was seen in the mid-range market (10,001 – 50,000 sq ft) with take-up 50% lower than the previous year. Partly explained by the lack of stock, but also this sector of the market is heavily populated by small and medium sized enterprises (SMEs) whose performance is greatly affected by the buoyancy of the economy.
Internet retail market pushes take-up
Buildings of 50,000 - 99,999 sq ft were the only units to see an upturn in activity. Take-up increased by 12.2% from the previous year’s figure. Explaining why, Steve said: “A large element of demand in this size range is being driven by the growing internet retail market and the challenges for delivery that this new phenomenon presents; this has therefore increased the traditional occupier base in this area of the market.”

Distribution warehouse availability falls to five year low
The tightening of supply in the distribution warehouse market continued to gather momentum, falling to 75.0m sq ft, the lowest level of availability since 2007. Current availability of grade A distribution warehouse stock stands at just over seven months supply.

Prime rental values increase in 52 UK locations
Despite the 25% fall in take-up, 88% of the 59 locations featured in our Industrial and Logistics Market 2013 report registered either growth or static 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.

Commenting Michael Alderton, Director of Industrial and Logitics, said: “We expect prime rental values will grow this year where new schemes emerge. Secondary rents are likely to register growth in locations where there is demand and acute shortages of supply – Greater London, South East, North West and West Midlands for example.”

Overall take-up will be constrained in 2013
Predicting what lies ahead, Michael said: “There is already a shortage of choice for occupiers and due to few, if any, developments completing this year occupiers will struggle to find suitable properties. Consequently occupiers will be forced into build to suit opportunities; this will meet with the needs of larger logistics occupiers but fall short in the provision for SMEs.”

Speculative development will return to satisfy demand in certain areas
In certain key locations where there is a demand for stock we will see speculative development this year, “This year the statistics are more dramatic showing that despite overall take-up being down the amount of space left in the market, of any quality, is seriously low and in some cases representing only one month’s supply of grade A space.  We believe now, more than ever before, the potential exists for a return to the provision of speculative space both in the large scale and small and medium size markets in key locations, and also in the newly evolving mid box sector,” concluded Steve.

To request a copy of the presentation that accompanies Industrial & Logistics Market 2013 please email Anna Silkstone.


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