2014 was a record breaking year for industrial take-up, with 23 national and regional records broken according to the latest figures from DTZ. Total UK take-up reached 32.6m sq ft over 2014, the highest since 2010, driven largely by improving economic sentiment and retailers expanding their logistics networks in response to the growth in online shopping.
DTZ Research’s Industrial Property Times report for H2 2014 also revealed that a record 14.8m sq ft of grade A space was taken over the last 12 months. In the North West, take-up was slightly down from 2013 but this was largely due to a lack of grade A accommodation.
2014 also saw the re-emergence of speculative development in response to the lack of available grade A space, with 9.1m sq ft taken through build-to-suit deals, double the 2013 total. Developers are largely building storage and distribution facilities and targeting locations with good access to the road network.
Take-up was strong for manufacturing (8.8m sq ft), logistics (6.8m sq ft) and retail sectors (12.7m sq ft). Jaguar Land Rover was the most active individual firm in the market in 2014, taking three buildings totaling 673,000 sq ft across the West Midlands. The largest deal of the year was a build-to-suit of over a million sq ft at Thrapston in the East Midlands.
Industrial prime rents are beginning to increase nationally, given the rise in activity and low level of grade A availability, which is driving competition between occupiers. Investor demand was strong in 2014, resulting in a record £6.1bn transacted in total. The largest investment deal of the year was Legal and General’s acquisition of the Ocean Portfolio, a prime, multi-let, industrial and logistics portfolio of 12 assets across the UK including Fradley Park in Lichfield, for £226.5m.
Michael Green, Research Analyst at DTZ commented: “Looking ahead to 2015, the need for speculative development will continue with more schemes across the UK set to be announced. We also anticipate high levels of take-up in 2014 to be maintained over the next five years as industrial output increases and occupiers look to increase their UK footprint, although continued difficulties in the Eurozone may have a dampening effect.“
Take-up in the North West totalled just over £4m in 2014, down 2.7m sq ft from the previous year. Key leasing transactions included a 686,000 sq ft Grade A build to suit deal at Omega in Warrington to the Hut Group and DHL taking 471,000 at the former Comet distribution facility in Skelmersdale. A lack of grade A space is suppressing take-up and contradicts a positive trend in occupier sentiment in the region although developers have begun speculative development with four schemes in Heywood, Knowsley, Chorley and Manchester Airport due for completion by Q3 2015.
Tony O’Keefe, Director, Industrial agency at DTZ in Manchester comments: “Whilst overall take-up figures were down on 2013 this can be explained by limited availability of quality built space and delays associated with land and pre-let deals, as opposed to a reduction in demand. This will show in significant transactional activity in Q1 2015.
“The continued strength of the logistics sector is demonstrated by Evander Properties and BA Pension funds speculative development at their Revolution scheme in Chorley.
“A new wave of speculative development will see over 500,000 sq ft of new development this year over four schemes, with another 1.6 million sq ft across 7 schemes in the development pipeline. This provides an excellent yard stick measuring confidence in the region.
“Confidence is underpinned by restricted supply and continued occupier demand as demonstrated by the recent success of the region’s largest development sites. Logistics North being a pertinent example. Outline consent was granted last year for 4 million sq ft of development, construction is underway to provide onsite services and road infrastructure and already 25 % of the scheme (over 1 million sq ft) has been taken.”