After a “mini-recovery” in 2010, take-up took a turn for the worse in 2011. David Hatcher reports
Take-up of big sheds was disastrous in 2011. Lettings of more than 100,000 sq ft across the UK were down by 46.5% to 13.1m sq ft compared with 2010, reports Jones Lang LaSalle.
At the start of 2011 there was optimism, as 2010’s 24.5m sq ft total take-up signalled a mini-recovery. Now the malaise in the retail sector and macroeconomic worries over the eurozone raise the possibility of another disappointing year.
“With the retail market being less bouyant and conerns over Europe, this year is expected to be poor as well,” says Jon Sleeman, UK research director at JLL.
“But occupiers can’t continue to delay decisions in definitely and there are still estimated to be around 24m sq ft of active requirements for distribution units in the south-east and the Midlands. Supply-chain efficiencies are crucial in maintaining businesses’ competitiveness.”
As companies try to improve operations, Sleeman expects an increased focus on the integration of different modes of transport and rail-connected ports.
“As UK plc continues to import more. there will be greater emphasis on container ports and their integration,” he predicts.
“We don’t see anyone really doing speculative building of any scale and with developers able to provide bespoke buildings [on a prelet design-and-build basis] within six months or less that’s unlikely to change soon,” says Sleeman.
All graphs show m sq ft.
The south-east was by far the most robust of the regions in 2011. Take-up dropped only marginally by 5.5% to 4.1m sq ft. However, only 122,000 sq ft was transacted in the fourth quarter, as occupiers delayed decisions and fears about eurozone woes heightened.
Overall take-up dropped by 64% and no new space was let. The market was held up by good-quality secondhand stock in the absence of large-scale speculative developments. JLL noted “significant incentive packages and flexible lease terms” are avilable.
The country’s traditional distribution heartland suffered a drop of 30.2% in terms of total take-up in 2011 and a particular drop-off in new space. Only one deal of 700,000 sq ft was agreed in terms of new space of more then 100,000 sq ft compared with 1.7m sq ft in 2010.
The east Midlands had a dreadful year compared with 2010, registering a 71.8% drop in take-up of sheds greater than 100,000 sq ft. The region was, however, bolstered by Marks&Spencer taking 950,000 sq ft and the Co-operative Group taking 480,000 sq ft.
Yorkshire and Humber was one of the quietest regions. Take-up totalled only 717,621 sq ft, which was a 77.2% reduction on 2010. However, JLL notes that virtually no development is ongoing in the region and as a result total availability is diminishing.
The north-west saw the largest amount of deals for new space of more than 100,000 sq ft achieved in 2011 of any region — a total of 2.6m sq ft. In total figures were still down, however — 2.8m sq ft compared with 4m sq ft the year before.
Only 482,000 sq ft was taken up in 2011 in the region, but this was still an improvement on 2010, when there was not a single deal of more than 100,000 sq ft. All 2011 lettings were for new space, but overall figures were still miles from the 2008’s heady total of 1.9m sq ft.
Scotland was the quietest of all the regions and only two deals of more than 100,000 sq ft, totalling 288,052 sq ft, completed. Both were for secondhand space. However, 311,000 sq ft of speculative development was ongoing at the end of the third quarter in five schemes.