Industrial & logistics Quarterly figures are volatile as Brexit uncertainty continues

Stalled board room decision-making as a result of Brexit uncertainty has impacted industrial take-up for the first quarter of 2019, resulting in the lowest Q1 reading since 2013.

However, according to Colliers International, this is just a temporary roadblock for the sector, with experts predicting that pent-up demand will produce a bumper year for take-up in 2020.

According to the Spring 2019 Industrial & Logistics Barometer, published by global real estate advisor Colliers International, national ‘Big Box’ take-up (100,000+ sq ft) slowed to 4.9 million sq ft in Q1 2019 – the lowest Q1 reading since 2013.

In addition, there has also been a lack of mega-deals, with only two deals of 500,000+ sq ft occurring between January and March 2019.

“Industrial & Logistics has been the undisputed standout performer over the last 12 to 18 months, successfully managing to navigate the unchartered waters of Brexit following the referendum in 2016”, said Len Rosso, Head of UK Industrial & Logistics at Colliers International.

“So despite this slow start to 2019, we believe that the fundamentals driving the Industrial & Logistics market remain unchanged. We are confident that by the end of the year, 2019 take-up will be in-line with the 10-year average of 25 million sq ft.

Rosso added: “With Colliers recently advising Verdion on another 731,000 sq ft mega-warehouse deal to a major online retailer at iPort in Doncaster, things look set to pick up as we progress into the year.”

Andrea Ferranti, Head of Industrial & Logistics Research at Colliers International, agreed: “We are confident that, once occupier confidence returns and investment decisions are implemented by those retailers executing their online strategy, pent-up demand will produce a bumper year for take-up in 2020.”

The sector has gone through major structural transformation over the past few years, with occupiers reacting quickly to the fast-changing consumer needs and a spike in online retail sales. As a result, developers and investors have responded by providing larger new build units to accommodate these changing requirements.

2019’s scheduled completions will total circa 10.8 million sq ft, up 55 per cent on the total space completed in 2018.

Speculative delivery in the 18-month period up to the end of Q1 2019 saw the completion of 8.5 million sq ft of warehouse space. Despite this, the supply/demand balance has remained healthy with circa 31 million sq ft of readily available distribution warehouse currently available, up only 4.6 per cent on Q1 2018.

Len Rosso continued: “Looking ahead, requirements by occupiers to bolster operational efficiency and reap the benefits of growing e-commerce demand will support the market this year. We fully expect this to translate into steady take-up in 2019, in line with the 10-year average, and a stand-out year in 2020.”