Savills played co-host to more than 300 guests from across the industrial & logistics sector at this year’s Shedmasters event in Barcelona on Friday 25th March. Research from the firm shows that take-up of industrial & logistics space (units of 100,000 sq ft +) stands at 9.1 million sq ft, 36% above the long term quarterly average. Savills anticipates that this could exceed 10 million sq ft by the end of Q1.
High levels of take-up have once again been driven by significant occupier demand from the online retail sector and 3PL sectors who accounted for 39% and 22% of demand, respectively.
As a result, supply remains critically low, with a vacancy rate of just 3.12%. Consequently, developers have responded to prevailing market conditions and there is now 21.1 million sq ft of speculative warehouse space now under construction due for delivery in the remainder of 2022 and into 2023. Savills notes that this is the highest amount of development at any time since the Global Financial Crisis.
Given the low levels of supply occupiers are starting to turn their attention back to the build-to-suit (BTS) segment of the market, which accounted for 67% of all take-up in Q1, up from just 37% in 2021. Given this lack of stock, coupled with high levels of requirements, Savills expects that this trend for BTS deals will continue further into 2022.
Kevin Mofid, head of industrial research at Savills, comments: “At present we are seeing no signs of demand slowing, which is continuing to push up rents across the UK. Given the significant lack of supply, it is likely that we will see increasing levels of build to suit activity as occupiers look to secure much needed space.”
Richard Sullivan, national head of industrial & logistics at Savills, adds: “There are a number of significant macro events currently impacting economies globally, which is once again placing pressure on businesses to future proof their supply chain. With some predicting online activity could account for as much as 50% of retail spend, this is only set to increase demand going forward. With this in mind, continued focus remains on delivering a development pipeline critical to servicing the UK’s needs.”