Steady Yorkshire industrial market in 2023 with positive outlook for 2024

Mirastar’s new Catalyst development at J33 M1

Occupier take up of industrial units in Yorkshire has settled back to pre-pandemic levels says Knight Frank.

The latest Yorkshire Industrial LOGIC report compiled by commercial property experts Knight Frank concluded that in 2023, occupational transactions in South Yorkshire was focused on units under 250,000sq ft, with distribution firms dominating over half of the annual take-up totalling 1.3m sq ft.

Whilst in West Yorkshire, take-up recovered from the record low level of 909,000 sq ft posted in 2022 to 1.6 million sq ft last year, mainly due to a steady delivery of new speculative space to the market.

Knight Frank anticipate demand across the size spectrum in 2024 with a continued focus on quality and prime locations.

Headline rental growth is expected to remain positive and move forward, with average growth of 3.3% forecast for 2024 for Yorkshire & the Humber – with a 4.06% forecast for Sheffield and 3.48% forecast for Leeds (RealFor).

Across Yorkshire, occupiers continued to prioritise quality and ESG standards with new builds and second hand, good quality grade A space proving most popular.

Talking about South Yorkshire and North Derbyshire, Rebecca Schofield, partner and head of the Yorkshire industrial team at Knight Frank said: “2023 take-up was more in line with pre pandemic transaction levels, with the majority of units let being sub-250,000 sq ft.

“There was a shortage of larger transactions last year with third-party logistics companies (3PLs) almost absent from the market. Many had their own surplus ‘grey’ space to back fill, which was their main focus.

Looking ahead for 2024 Rebecca added: “We have started to see a number of new requirements enter the market across the size spectrum, which we hope to see move forward during the first half 2024. We have seen demand for space from 3PLs, end occupiers and manufacturers.

“The region has seen a number of new development completions, along with second-hand stock returning to the market, resulting in a healthy supply of buildings, giving occupiers a wider choice. The requirements in the market appear serious about acquiring premises but decision making is taking a little longer,

Key occupier deals in South Yorkshire last year included Gem Imports acquiring186,000 sq ft at Arrow 186 in Barnsley; Butternut Box taking 132,750 sq ft at Symmetry Park in Doncaster, and JLA acquiring 109,000 sq ft at Mirastar’s new Catalyst development J33 M1

Reviewing West Yorkshire & the Humber industrial sector, Iain McPhail, partner in Knight Frank’s Leeds office, said: “We have witnessed a ‘flight to prime’ from occupiers over the last 12 months, with well-located developments with good motorway links and high ESG credentials attracting a good deal of interest, for example, Leeds Valley Park and Velocity Point, both in Leeds.

“While occupiers continued to display a sense of cost conservatism, the steady delivery of new, speculative space to the market towards the last quarter of 2023 has created more choice and contributed to a gradual recovery in take up from its record low in 2022.

Key occupier deals in West Yorkshire and the Humber region in 2023 included Advanced Supply Chain’s pre-let of 230,000 sq ft at Super B Cleckheaton; XPO’s move to 211,364 sq ft at Voltaic in Wakefield; IFCO’s 153,323 sq ft pre-let at Prism Park in Wakefield; and Siemens Mobility pre-let of 94,841 sq ft at Point 36 in Goole.

“A significant volume of new build space reached practical completion during the final quarter of 2023 (c. 1.3 million sq ft, units 50,000 sq ft+). Consequently, the supply of immediately available space steeply rose to 4.2 million sq ft by year-end, increasing the vacancy rate from 4.3% in Q3 to 6.3% in Q4. However, 22% of this available space is currently under offer.”

Looking ahead at 2024 he added: “Several new build mid-box units are under offer in the region, which will see quoting rents increase again from £8.75 per sq ft to circa £9.50 per sq ft in early-mid 2024.

“Similar to South Yorkshire, after a quiet 2023 from the 3PL market in the region, we are starting to see more contract-led requirements return, so expect more activity in this sector.

“New development is being hindered by the absence of speculative institutional funding with the exception of Baytree Developments two unit proposed speculative development in south Leeds which should commence shortly. Consequently, we expect the medium-term pipeline of units over 50,000 sq ft to remain constrained in the region, adding to the view that rental growth may continue to steadily rise.