While uncertainty around Brexit continues, in the industrial and logistics sector we are witnessing almost record levels of take-up as occupiers compete to future-proof their supply chains.
In 2018, retail accounted for a record-breaking 54% of take-up, as changes in consumer behaviour continue to drive demand. This is also evidenced by recent activity in the market such as Tritax Big Box REIT’s recent acquisition of an 87% stake in db symmetry.
Despite political and economic turbulence, occupational demand has remained buoyant on the back of steady economic performance.
Rents and land values have grown tremendously, particularly in reater London, the Midlands and some key South East locations, making the industrial sector 2018’s standout performer.
Full-year take-up for 100,000 sq ft-plus warehouses topped 32.7m sq ft last year– up 28% year-on-year and just shy of 2016’s 32.8m sq ft record take-up. There is now less than 30m sq ft of available space in the 100,000 sq ft-plus category – marginally above the market’s five-year annual average take-up for 2014 to 2018, indicating that just about a year’s worth of supply is left to satisfy current demand.
A pick-up in the amount of speculative space has done little to bolster current availability, with some tenants commissioning design and build (D&B) space; for example, Wayfair pre-letting a 1m sq ft D&B warehouse at Magna Park, Lutterworth.
While things might ease with 8.5m sq ft of speculative space due for completion this year, it is worth noting that more than 4.7m sq ft of new distribution warehouses were taken up in 2018.
A lack of supply and buoyant market activity has meant prime rents in England for small and bigger sheds rose by 5.9% and 3.8% respectively last year.
Industrial and logistics investment volumes topped £8.3bn in 2018, accounting for around 14% of UK deals in all sectors – the second highest share on record and 65% up on the 10-year annual average.
The industrial sector has had two stellar years in terms of investment performance and we fully expect the sector to remain a top performer in 2019.
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