New data from BNP Paribas Real Estate has found that total completions of speculatively developed logistics units, over 100,000 sq ft, throughout 2018 are set to surpass this cycle’s peak.
There is currently c. 3.6m sq ft under construction which is due to complete over the remainder of this year. Taking into account that more than 5.5m sq ft was delivered by September-end 2018, it is anticipated that newly completed units for the full year will total c. 9.1m sq ft, representing a high for this cycle, with another 3.8m sq ft currently scheduled to complete over H1 2019.
The new data from BNP Paribas Real Estate also shows that c. 3m sq ft of speculatively developed units have been taken up so far this year, and a further 1.4m sq ft is currently under offer. Occupier demand remains strong for the best Grade-A units in core locations.
The research also shows that national average void rates for buildings which are completed and let currently stands at 6.2 months, with the void for units that have completed and are available to let at 10.7 months. Regionally, the West Midlands has been the best performer, with the average void periods at 3 months and 10 months respectively.
Ben Wiley, Head of Industrial & Logistics Agency at BNP Paribas Real Estate, commented: “While developer confidence in current market dynamics has led some to believe that increased speculative development could lead to a softening of rental levels, the occupier market has instead gone from strength-to-strength. The ongoing demand for good quality logistics units continues unabated and void periods remain subdued in core locations.
“This encouraging replenishment of new development has been matched by occupier demand and, in some instances, this has resulted in new rental benchmarks being set on newly-developed units.
“A recent example is the letting of a newly-delivered distribution warehouse at Horizon38, Bristol, where automotive parts supplier Apec Braking signed a 15-year lease on 115,500 sq ft. The unit was let within nine months of practical completion and at a reported new record headline rent in the area, for units greater than 100,000 sq ft, of £7.25 psf.”