BNP Paribas Real Estate analysis has revealed that circa 4m sq ft of UK Grade A big box industrial & logistics space has become available for sublet from significant owner-occupiers such as Amazon.
Out of the 30m sq ft total supply of existing big box units available in Q1 2023, over 4.1m sq ft of the high quality space has been released back into the market via subleasing. The news comes as industrial take-up over 100,000 sq ft reached 6.8m in Q1 2023, which was 49% less than Q1 2022, and is below the 10-year quarterly average.
According to its review of Q1 2023 Big Box take-up by specification, 44% was occupied by build-to-suit, speculative (37%), and second hand space (43%). In terms of business sector, logistics accounted for 58% of this, manufacturing (25%), and retail (16%). The Midlands saw the highest take-up levels, with the East Midlands equating to 2.5m sq ft of all deals, followed by the West Midlands at 1.4m sq ft.
Ben Wiley, head of industrial agency at BNP Paribas Real Estate commented: “Following the exponential rise in take-up over the past few years, a number of occupiers are taking a slight pause to review their options given the current economic and political challenges. Although demand has remained relatively resilient, decision-making is naturally taking longer than usual, and occupiers are exercising more caution than ever with regards to their leases. The majority are seeking price reductions or improved terms, which, to date, is still not transpiring with supply remaining tight.
“Since the start of the year, we have seen unprecedented levels of new enquiries coming through from a wide range of occupiers, particularly from new UK entrants – which we anticipate will continue well into next year. Conversely, a number of high profile occupiers are consolidating their spaces, which in many cases was only taken in the last 24 months or never occupied. Encouragingly, there has been strong demand for these, partly due to the units’ stronger ESG credentials and EPC ratings.”
Eoghan Morgan, industrial markets research at BNP Paribas Real Estate added: “Our latest data suggests that logistics operators took over half of big box units last quarter, with deal activity further backing up the onshoring trend as occupiers seek to challenge the on-going supply chain issues. We’re seeing take-up of this nature directed toward those which offer a mix of manufacturing and distribution, making ‘last mile’ space that occupiers like Amazon are subleasing, extremely attractive to these tenants.”
There is currently circa 13.5m sq ft of industrial and logistics space under construction in the UK at present, and over 3m sq ft of which is available for build-to-suit. The East Midlands have in excess of 4m sq ft currently being built, which would not presently satisfy two quarters of demand in what is the most popular location for logistical needs. A further 43m sq ft of proposed space is available at various stages of planning.
The largest occupier deals of Q1 2023 include TK Maxx taking 454,130 sq ft at Crewe Commercial Park, Hello Fresh taking 434,000 sq ft at The Orchard, and DSV taking 387,000 sq ft at Brackmills Gateway.