UK logistics market continues to outperform

Simon Lloyd, Partner, Logistics & Industrial Agency, Cushman & Wakefield in Birmingham

Logistics property delivered another robust performance in Q3 with total take-up reaching 6.5 million sq ft, up 43% on the same period in 2017, according to research from Cushman & Wakefield.

The report revealed that an increase in speculative development combined with pent-up demand for high-quality space has led to the highest amount of speculative space absorbed over a single quarter since 2012 (1.8 million sq ft).

The availability of Grade A space has risen by 50% over the year, bolstered by an increase in speculative development, which reached 10.5 million sq ft under construction during Q3.

Retailers and eRetailers continued to drive demand, accounting for 44% of take-up volume, making up for a quieter manufacturing sector which saw 21% of take-up, compared with 30% last year. In one of the largest deals of the quarter, Amazon committed to a new 360,000 sq ft purpose-built warehouse at M6 Major Haydock in Merseyside.

The availability of new stock is driving prime rents, with the North West registering the strongest prime rental growth over the year (6.2%), followed by London (5.9%) and Yorkshire (5.5%).

In the Investment market, logistics property continued to outperform other commercial sectors, posting total annualised returns of 17.7% and 22.1% for distribution warehouse and standard industrial respectively in Q2.

Bruno Berretta, UK Logistics & Industrial Research & Insight, Cushman & Wakefield, said: “Whilst the manufacturing sector has been noticeably less active this year, largely due to Brexit uncertainty, the positive structural impact of e-commerce means there are reasons to be optimistic about the sector even in these uncertain times.”

He continued: “The issue of stockpiling has dominated headlines over the last few months but the reality is that companies requiring additional space will look at flexible solutions in the short-term. Occupiers are waiting for greater clarity on Brexit and a breakthrough in negotiations could potential unlock requirements put on hold and support activity in what remains a very resilient market.”

Simon Lloyd, Partner, Logistics & Industrial at Cushman & Wakefield: “Whilst manufacturing take-up has reduced, it is anticipated that there will be renewed demand once the trade arrangements from a Brexit deal are known. The current demand for logistics buildings means that there is still a lack of choice for occupiers, resulting in continuing upwards pressure on rents and land values.”