UK sees a shed spec development boom

The UK logistics market is in the middle of a new speculative development boom, according to exclusive data provided by Cushman & Wakefield.

With demand for logistics space currently outstripping supply in some parts of the country, fuelled in large part by the shift to online retail during the pandemic, a number of developers have pushed ahead with aggressive speculative development plans.

During 2021, Cushman & Wakefield forecast that more than 12.5m sq ft of speculative space will be completed – not far off the record 13.5m sq ft that was delivered in 2019. In 2020, the figure was just over 8m sq ft.

“Developers and investors continue to be galvanised by the lack of supply, low void periods of just over 12 months – it is worth noting that in Q1, some 750,000 sq ft had let before practical completion – and the sector’s above-average rental growth prospects,” says Bruno Berretta, retail, logistics and industrial research lead at Cushman & Wakefield.

Newfound confidence

Berretta adds that with anticipated rental growth of nearly 3% over the next five years, developers are becoming increasingly confident they can deliver speculative development – and he expects this trend to continue over the next few years.

“Going forward, we expect continued appetite for speculative development as fundamentals remain supportive and investors seek to deploy capital in a crowded market,” says Berretta.

“However, the volume and pace of new deliveries is likely to be impacted by the shortage and rising cost of building materials, from steel to concrete.”

He adds: “As new starts are potentially delayed and construction lead times lengthen, speculative completions could slow next year.”

More than 13m sq ft of speculative industrial space was gobbled up by occupiers last year and if that rate of take-up continues, availability could remain constrained for some time.