A surge in speculative development in the UK logistics and industrial sector contributed to a 35% rise in grade A availability in the first quarter of the year, according to Cushman & Wakefield.
Research from the real estate services firm shows levels of grade A stock reached 26.8 million sq ft, accounting for 45% of all available space.
Total availability rose by 11% and now stands at 59.2 million sq ft. The largest increase in availability (30%) was registered in the Midlands reflecting the construction of several large speculative units across the East Midlands.
Cushman & Wakefield’s research also revealed that take-up slowed during the first quarter of the year to 6.5 million sq ft across 42 deals following a strong end to 2018.
Amazon and other E-commerce occupiers continued to dominate the leasing market accounting for a third of total take-up. The largest deals of the quarter were both by Amazon – a 730,000 sq ft pre-let at iPort Doncaster and 575,000 sq ft at Gazeley’s Altitude in Milton Keynes, the largest speculatively-built unit previously available on the market.
Despite the uncertainty surrounding Brexit, enquiries tracked by Cushman & Wakefield for units over 50,000 sq ft rose to their highest quarterly level since 2016, reaching 266, suggesting that subject to a positive resolution of the current Brexit impasse, momentum will pick up towards the end of the year. Brexit negotiations also had an impact on investment into the UK logistics sector with volumes down 57% from Q1 2018.
Prime rents continued to rise, with London, Yorkshire and Wales all seeing annual growth rates above 5%. Prime rents for 50-100,000 sq ft units also grew at a faster annual rate of 3.8% than larger distribution warehouses, reflecting the demand for units near urban centres catering for last mile deliveries.
Bruno Berretta, UK Logistics & Industrial Research & Insight, Cushman & Wakefield, said: “Whilst take-up has slowed in the first quarter of the year due to uncertainty surrounding Brexit and the economy, a slowdown in activity was on the cards but the basic market fundamentals are still strong. Logistics continues to outperform other commercial property sectors, posting a total annualised return of 12.2% in March.”
Simon Lloyd, Partner in Cushman & Wakefield’s National Logistics & Industrial team said: “Whilst there is an increase in supply, both the size and geographical range are wide which means that the choice for occupiers is not as extensive as it might first appear. For many, build to suit options may well prove to be the optimal solution.”