South West industrial space shortage could lead to ‘skyscraper sheds’

Tim Davies, Head of the Bristol Office of commercial property specialist Colliers International

An unprecedented shortage of industrial space in the South West could result in ‘skyscraper sheds’, according to a leading logistics expert in the region.

Latest data from global real estate advisor Colliers International shows the UK has just over a year’s worth of industrial space left – just 1.3 years nationally, and even less in the South West where industrial availability has declined by 61 per cent since 2009 and just 1.2 years of supply remain.

Tim Davies, head of Industrial and Logistics for the South West at Colliers International said this could result in the construction of higher warehouses.

“UK industrial availability has fallen on average 62 per cent since 2009, and industrial supply is likely to fall further due to continued demand from e-commerce, lower levels of speculative starts, and the loss of industrial commercial land for other uses such as residential,” he said.

“The development of new distribution facilities is crucial to economic growth in the South West, and it is not inconceivable that developers will follow the example of places such as Hong Kong, Singapore and Japan and build ‘skyscraper sheds’ of several storeys in height.

“Already in the South West we have seen Bristol become the most expensive place in the UK in which to rent industrial space outside London and the South East, following a significant acceleration in industrial rents resulting from stock in the region being at an all-time low. In addition requirement for space is increasing, driven by the demand of e-commerce for extensive warehouse space.”

The Colliers International Summer 2017 UK Industrial & Logistics Market Barometer shows that despite investor demand and the reduction in availability and supply, just 17 million sq ft of industrial space is under construction.

There has been a 60 per cent decline in speculative completions since 2007, according to the data, with speculative industrial schemes now accounting for just 28 per cent of all UK developments under construction. Colliers predicts that completions will fall by 60 per cent in 2017, to 3.5 million sq ft.

The data also shows that industrial sector continues to attract strong investor interest, with investor volumes of £3.4 billion in the first half of 2017, exceeding the first half of 2016 by 13 per cent.

“Following the outcome of the European referendum, there has been stronger demand for industrial space from the manufacturing sector due to the weakening value of sterling encouraging a surge in demand for British goods,” said Bo Glowacz, Senior Research Analyst, Research and Forecasting at Colliers International.

“The sector now accounts for 27 per cent of the market, up from 19 per cent in 2016; second only to retailers and wholesalers who account for 33 per cent of demand.”