Latest research reveals that Industrial and Logistics supply in the North West region is at a very critical level with only 1.7 million sq ft available of units sized 100,000 sq ft + left. However as of the end of 2021, nearly half of this space was either under offer or due to complete in Q1 2022.
According to commercial real estate firm Colliers’ latest Industrial & Logistics Viewpoint report, only three Grade A units are currently available and one of these units is Super W in Warrington (245,000 sq ft) developed by Tungsten/British Airway Pension Fund, which Colliers is marketing. In terms of new availability, the firm’s records show that circa 3.8 million sq ft was under construction and marketed for completion in 2022.
John Sullivan, Director and Head of Industrial and Logistics North West at Colliers commented: “This high level of demand, in a depleted supply environment has caused strong rental growth with annual prime average rental growth reaching 11.2 per cent in January 2022. In 2023, we will see more rental growth with developers likely to guide between £8 per sq ft and £8.25 per sq ft for the best products (100,000 sq ft-plus ) around Manchester and Warrington.”
Occupier demand for distribution warehouses of 100,000+ sq ft remained very strong in the North West and reached 5.9 million sq ft in 2021, just slightly lower than the record 6 million sq ft recorded in 2020 and 42 per cent ahead of the five-year annual average.
When analysing take-up by unit type, the region saw 65.3 per cent of take-up on new units (40.1 per cent for speculatively developed units and 25.1 per cent for purpose build units), and 34.8 per cent for second-hand units.
The report explains that Amazon was very acquisitive and agreed several lettings in the North West region, 650,000 sq ft at K800 site in Knowsley; 216,000 sq ft at Kinsway216 in Rochdale; Unit 2 & 3 Mountpark Omega Mountpark (203,000 sq ft and 225,000 sq ft); Venus 217, in Knowsley and Unit F2G Multiply Logistics North (149,000 sq ft). Elsewhere, AO.com agreed the pre-let of Crewe 305 (305,000 sq ft) at Panattoni Park Crewe and UPS took the newly developed 280,700 sq ft warehouse at Panattoni Park, Bolton.
Industrial investment in the North West region broke the one billion pound mark for the first time in history in 2021 and settled at near £1.1 billion.
This record activity was 26.6 per cent higher year-on-year and accounted for 27.2 per cent of total investment volumes across sectors.
Chris Ward, Associate Director, National Capital Markets at Colliers said: “Like in many major regional markets in the UK, pricing for industrial assets has sharpened particularly for long income/single let-opportunities. Prime yields in key North West distribution hubs such as Warrington, Manchester and its surrounding towns have for the first time compressed below 4 per cent for 10-year and long income opportunities. An example of this includes NFU Mutual’s acquisition of the 216,000 sq ft Kingsway 216 warehouse let to Amazon (10-year lease) in Rochdale for £32.6 million at a net initial yield of 3.74 per cent. Looking forward, we envisage pricing to remain keen with strong investor appetite for well-located and well-let properties to continue unabated.”
Andrea Ferranti, Head of Industrial and Logistics Research at Colliers added: “The performance of the UK industrial market is breaking records and investors are betting on the long-term performance of the sector. Prime warehouse rents will rise by 12.5 per cent in 2022 and 8.5 per cent in 2023. We predict that increasing rents, land values, construction costs, logistics and labour costs will not dissipate in 2022 and that occupiers will need to act quick to secure a deal. We expect there will be more bidding at uncomfortable levels and purchasers might need to consider speculative funding to seek higher returns due to yields being at historic lows.
“The warehouse of the future will require more highly skilled people, a robust power supply, a good pool of labour and also Grade A workspace to not only attract and retain talent but also investors. More ESG regulations will also be introduced which will further affect the sector from a cost perspective as investors seek to purchase net-zero properties and occupiers are required to adopt more sustainable technologies.”
