Secondhand sheds first for occupiers

Manufacturing was the most active sector, accounting for 42% of total take-up in 2017. “Towards the end of the year, the German manufacturer Prowell announced plans to build a new 328,000 sq ft build-to-suit facility in Ellesmere Port, in what has been seen as a vote of confidence in North West manufacturing post Brexit,” says Bruno Berretta, associate in Cushman & Wakefield’s industrial and logistics research and insight team.

While the ecommerce market in 2017 was not as active as the previous year, there were still a number of key deals including Amazon’s move into a 365,000 sq ft logistics hub at Logistics North, Bolton.

“Demand from the ecommerce sector remains strong, with a number of large requirements remaining unsatisfied,” adds Berretta. “We anticipate this demand to remain consistent with continued growth in online spending.”

However, wider demand was patchy, especially for new speculatively developed stock – 1.3m sq ft of space developed in 2016-17 was still empty at the end of the year, including L175 at Liverpool International Business Park, Kingsway 216 at Kingsway Business Park in Rochdale and Link 95 at Hareshill Distribution Park in Heywood, near Bury.

Berretta says this hangover of vacant new-build stock reflects occupiers’ preference for secondhand space. Last year, grade-B and grade-C accommodation accounted for nearly two thirds of take-up and much of the secondhand availability has been absorbed.  

Sam Royle, senior surveyor in Cushman & Wakefield’s logistics and industrial team in Manchester, agrees. “Good-quality secondhand refurbished property is often occupiers’ preference where possible as they can see cost advantages over new-build accommodation,” he says. “Occupiers are also likely to secure more favourable terms on secondhand stock.”

Nevertheless, speculative development has continued in core locations, with 1.2m sq ft across seven buildings currently under construction, taking total availability of grade-A space to 2.5m sq ft.

“There is, however, little availability of new-builds in the 200,000 sq ft to 300,000 sq ft bracket,” says Royle, noting that all the schemes under construction are below 200,000 sq ft with the exception of 375 at Logistics North, which is 375,000 sq ft and scheduled to complete in Q3 2018.

Prime rents increased by an average of 6.5% across the region in 2017. Notable deals include Logistics 225 at Logistics North, which let at a rent of £6/sq ft in Q1 2017.

“Although we have seen rents improving, rental growth is likely to moderate going forward reflecting an increased choice for occupiers,” says Royle.