Race to ESG and shortage of supply underpin Q3 industrial and logistics demand

Integra 61, Durham

Despite the uncertain outlook for commercial real estate and the wider economy, the industrial sector’s resilience and strong market fundamentals have held firm, according to latest data by Avison Young.

“Although take-up levels year to date have fallen short of 2021’s total (40.28 million sq ft), this has been driven not by the current economic climate but by a chronically undersupplied market. Availability of grade A space stands at 24 million sq ft, equating to only 2 months’ worth of supply.

Nevertheless, demand should remain strong, particularly for ‘best-in-class’ buildings with strong ESG credentials. Landlords will look to capitalise on this demand by deploying additional grade A stock and further retrofitting existing stock as they progress towards the government’s MEES targets by 2030”, said Andrew Jackson, Principal and Managing Director, Industrial at Avison Young.

UK Grade A big box take-up (over 100,000 sq ft) amounted to 14.8m sq ft (higher than Q2’s 10.3m sq ft total) and slightly higher than the same period in 2021. Yorkshire and the Northeast saw the most activity

Overseas investors dominated the quarter, accounting for 71.6% of investment activity (vs a 43% five-year quarterly average across the same group).

In the north east key deals included SeAH Wind taking 1.13m sq. ft. at South Bank, Teesside and Lanchester Wines self-build 240,000sq ft scheme at Greencroft Industrial Estate, Stanley. Nissan MM UK also leased a 100,000sq ft building at Cherry Blossom Way, Sunderland whilst The Storage Place leased 160,000sq ft at Mill Hill, Peterlee.

Danny Cramman, Director at Avison Young, Newcastle adds. “The next nine months will see a significant increase in the NE supply pipeline with over 1.1 million sq. ft. of units being completed at Turbine Business Park, Hillthorn Business Park (both Sunderland) and at Integra 61near Durham.”