In Q2, construction began on schemes totalling 2.2m sq ft – more than double the volume recorded in Q1 and the largest quarterly total for almost two years.
“We saw a range of developers start speculative construction during Q2,” says Gerald Eve research partner Steve Sharman.
However, he says that tenant demand for speculatively developed space is not as strong as it was last year.
“We are closely monitoring the void periods on all recently developed schemes as we are not seeing the same level of frenetic occupier interest in spec schemes that we saw at the end of last year, when several buildings were let while still under construction,” he says.
Last year, 1.8m sq ft of speculatively developed space across 14 buildings was let during construction, whereas only 350,000 sq ft across three buildings has been let so far this year.
As for the wider leasing market, Gerald Eve recorded 11.3m sq ft of deals in Q2, 5% up on Q1 but 6% down on the same period last year.
The take-up figures were boosted by Amazon’s acquisition of 33.5 acres at Central Park in Avonmouth for the development of a 2.2m sq ft multi-storey warehouse.
“In the absence of the Amazon development in Avonmouth, overall quarterly volumes would have been below par,” says Sharman.
However, Gerald Eve also recorded a greater number of small deals during Q2, which it says is encouraging for the market.
“It’s interesting that our research has also found an increased demand for smaller sheds during Q2,” says Mark Trowell, agency partner at Gerald Eve.
“We are certainly seeing that in London and the South East, but the availability of sites and buildings that can be developed for urban logistics continues to be lost to higher-value uses.”