Industrial occupier demand up for South Yorkshire

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Motorpoint Sheffield site.

Knight Frank has reported a marked improvement in occupier demand for logistics and industrial properties with take-up in South Yorkshire for the second half of 2016 finishing well ahead of the half yearly average.

Take-up of units above 50,000 sq ft reached 1.8m sq ft in the last six months of the year, more than double the level of take-up over the previous six months.

Deals secured brought the total for the whole of 2016 to 2.5m sq ft, compared with 1.5m sq ft in 2015.

Activity in Doncaster dominated the period with lettings to Amazon and Ceva at I-Port, which has outperformed the rest of the market and set new headline rents for the region of £5.50 per sq ft for units between 140,000 and 200,000 sq ft.

Other major transactions completed included the 109,000 sq ft purchase of the former Carcraft site in Sheffield by Motorpoint, the 135,000 sq ft Amazon letting at Victory Park in Sheffield and 70,000 sq ft to The Bed Shop at Aldwarke Wharf Business Park.

Commenting on Knight Frank’s Logic Report for South Yorkshire, Rebecca Schofield, partner in the Sheffield office, said: “Demand continues to be driven by a variety of sectors, including warehousing, production and manufacturing.
“Parcel carriers are still active with many still looking to expand. 3PLs still dominate demand for large distribution units.

“Whilst there is less supply for them to choose they are still cautious about committing to long lease terms and generally look for lease terms which mirror contract lengths, resulting in them often seeking five year breaks in some cases.

“Regionally we are also witnessing good levels of demand from the manufacturing sector, which is evident by the continued success at The AMP where headline rents of £7.25 per sq ft have now been achieved on sub 20,000 sq ft units.”

In terms of speculative development in South Yorkshire there is currently 52,000 sq ft across six units at The Advanced Manufacturing Park under construction; 75,000 sq ft has just been completed at Helix, J36 M1 and 195,000 sq ft at I-Port, Doncaster is on site due for completion May 2017.

Phase 2 Vantage Park, Sheffield is expected to be on site in the Spring with 17 units of 4,500 sq ft upwards.

There is also land around the M1 and M18 with outline consent. Schemes include Capitol Park, Barnsley (12 acres) able to accommodate up to 150,000 sq ft in a single building; Smithywood, J35 M1 (29 acres) abole to accommodate 30,0000 – 350,000 sq ft units; Doncaster Distribution Centre offering 100,000 – 1,000,000 sq ft, and Tudor Cross, J29a M1 where remediation is due to be completed March with and land sales or buildings of up to 400,000 sq ft available.

In the last quarter of the year, prime headline rents in the sector stayed around the £5.00 to £5.50 mark per sq ft and Knight Frank expects further improvement on this.

Looking ahead for the region, Rebecca added she expected to see continued demand and subsequent rental growth.

“We expect continued developer response to the lack of quality stock and hope to see a return to Design & Build.

“Small unit development will still be difficult to make viable. Although there is demand and rents have improved, build costs often make it prohibitive.

“As a result of the limited new supply of small to medium sized units expected to enter the market, good quality second hand stock has witnessed increased demand and rental growth and this will continue where good quality refurbished stock is offered to the market.”