More than 4.1m sq ft of industrial property was acquired by occupiers in 2022 in South and West Yorkshire.
Distribution occupiers continued to dominate the market with 63% take up in West Yorkshire and 57% in South Yorkshire.
The figures are highlighted in Knight Frank’s latest LOGIC report, which profiles occupier and investment market trends across the region and sector and shows how distribution and retail occupiers for high quality units have supported take up, activity and rental growth last year.
Commenting on South Yorkshire and North East Derbyshire, Rebecca Schofield, partner and head of Yorkshire Industrial at Knight Frank, said: “The final quarter of 2022 recorded 927,300 sq ft of industrial and logistics occupier take up in the South Yorkshire & North East Derbyshire region (units 50,000 sq ft+). This brings the year end total to 3.1 million sq ft and, while notably below the record levels seen last year, take up is 8% ahead of the five-year annual average for the region.”
Take up in Q4 was boosted by one significant pre-let deal; automotive distributor AAG signed a 25-year lease on the 629,417 sq ft Panattoni Park in Rotherham expected to be completed later this year with a minimum BREEAM rating of ‘Very Good’ and an EPC rating of ‘A’.
Rebecca added: “Reflecting the robust demand for new, high quality industrial space, 76% of take up in 2022 comprised of new speculative buildings and build-to-suit units. This compares to 53% last year.
“South Yorkshire & North East Derbyshire will see a number of speculative schemes reach completion during 2023.
“Supply levels remain tight as new and modern second-hand space was been quickly absorbed. Availability stood at 1.4 million sq ft at year end (units over 50,000 sq ft), with a vacancy rate of 2.3%. There are only two units over 250,000 sq ft immediately available for large occupier requirements.
“2022 saw a significant uplift in development activity in the region in response to the shortage in supply (units 50,000 sqft+). Almost 3.1 million sq ft of speculative space was under construction at year end, across 18 units.”
Developments under way include PLP’s Bessemer Park, Sheffield where 4 units totalling 605,000 sq ft are currently under construction; three units comprising almost 572,000 sq ft at iPort, Doncaster; and two units totalling over 200,000 sq ft at Catalyst, Sheffield. Development has also started on site with the first phase of development at Horizon 29, J29a M1 which includes units of 73,000 and 133,000 sq ft which will be available for occupation spring 2023.
Rebecca added: “Continued demand from distribution and retail occupiers for high quality units should support take up activity and rental growth this year. We’re also witnessing demand from other sectors, including manufacturing and vertical farming.
Commenting on West Yorkshire and The Humber, Iain McPhail, partner in the Yorkshire Industrial team at Knight Frank in Leeds, said: “The industrial and logistics market in 2022 was characterised by the critical shortage of good quality, large stock, with occupiers continuing to face limited options.
“This resulted in record low take up levels, with under 1 million sq ft of space occupied during the year, compared to 5.7 million in 2021 (units over 50,000 sq ft). The annual total stands 71% below the five-year average. This also contrasts with neighbouring South Yorkshire, in which 76% of take up in 2022 comprises new-build space, compared to just 7% in West Yorkshire.
“The final quarter saw just one deal take place, with event transportation company, Stage Freight, leasing 100,000 sq ft at Towngate PLC’s Copperworks 2 in Leeds. The distribution sector accounted for the majority of take up in 2022 (63%).
Total availability of units over 50,000 sq ft stood at 1.6 million sq ft at end-December, resulting in a vacancy rate of 2.4%. This compares to 1.9% recorded in Q4 2021, and while supply levels increased on an annual basis, the vast majority (92%) of space is second-hand grade B or C, while there are no units over 250,000 sq ft currently available.
Iain added: “The latter half of 2022 saw developers respond to the shortage of stock in the regions with several developments commencing construction. As of the end of December, 2.5 million sq ft of space was under construction speculatively across 16 units, compared to just 186,000 sq ft recorded one year ago (units over 50,000 sq ft). A further 556,000 sq ft is in the planning pipeline.”
Ten developments started in Q4, including the 1.1 million sq ft Konect 62 inSelby, with the largest unit being the 735,000 sq ft warehouse branded ‘Big K’. Other notable schemes underway include Velocity Point in Leeds, S42 in Sherburn in Elmet, Howden 62 in East Riding and Thornbury Business Park in Bradford.
The underlying supply/demand imbalance in West Yorkshire & the Humber has led to rental growth across all size units. Prime rents in Leeds for units over 50,000 sq ft rose by 11% annually in 2022, with new builds now quoting / guiding £7.50 – £8.95 psf at year end.
Iain added: “Despite the wider economic conditions, we anticipate a greater level of take up towards the end of 2023, as much needed speculative development enters the market, including the six-unit mid box scheme at Leeds Valley Park in Leeds, and the completion of Super B and Interchange 26 in Bradford.
“It’s been an interesting 12 months in the sector. On one hand, there’s continued healthy enquiry levels and rental growth, yet due to the region being starved of grade A buildings, it has resulted in a significant reduction in take up, a scenario we predicted in 2021.
“It is widely agreed that the dearth of grade A availability is the root cause of the reduction. This is further evidenced by neighbouring South Yorkshire posting continued strong 2022 take up levels, reflecting more availability in that region.”