Strong Q3 take-up levels for ‘big sheds’ puts Industrial & Logistics sector just short of 2016 record high by year end

Len Rosso, Head of Industrial & Logistics for Colliers International.

Continued strong levels of take-up for ‘big sheds’ across the UK will see year end totals finish just short of the 2016 record high (32 m sq ft), according to Colliers International’s latest Industrial & Logistics Barometer for Q3 2018. Meanwhile, high Q3 take-up levels have resulted in an all-time low in availability, with just 1.5 months’ worth of supply of large speculative developments (over 100,000 sq ft) available to meet current market demand.

Availability of industrial space over 100,000 sq ft in size has fallen on average by 71 per cent in the last 10 years; with Wales (down 85 per cent), the North East (down 76 per cent), the South East and West Midlands (both 75 per cent) amongst the worst affected. In addition, the number of speculative developments due for completion before the end of the year is below the annual four-year average (2013-2017) of 4.46 m sq ft; currently standing at 3.5 m sq ft.

Meanwhile, take up of industrial space over the 100,000 sq ft threshold, has continued to rise year on year with 23 m sq ft transacted so far this year, up 3.7 per cent on the same period in 2017. Total annual take-up levels for 2018 are expected to reach 29.9 m sq ft by the end of the year; which is well above the seven-year average (2010-2017) of 27.3 m sq ft and just short of the most recent record high in 2016 (32.2 m sq ft).

“The market is in good shape and we’re on track for another strong year of deals activity, so it’s no wonder we’re seeing availability levels continue to fall year on year. However, it’s the severe lack of available development land across the UK that is continuing to impact the sector,” said Len Rosso, Head of Industrial & Logistics for Colliers International. “We are operating under a challenging planning system, whereby we are seeing the limited land that is available for development being earmarked for residential, due to continued pressure from Central Government to address that national housing shortage. As a result, not enough land is coming through for industrial and logistics development, severely diminishing the sector’s ability to meet the continued demand from operators.”

Colliers’ latest Industrial & Logistics Barometer shows that ‘Retailer & Wholesalers’ continue to represent the largest proportion of deals, accounting for 53 percent (10.6 m sq ft) of transactions completed so far this year, which compares to 43 per cent in the same period last year (Q1 to Q3 2017). 3PL and Transportation was the next most active sector, accounting for 24 per cent, followed by Manufacturing at 18 per cent.

Rosso continued: “Brexit and other macro-economic factors are still impacting decision making, but 2019 has 6 m sq ft of large scale speculative development scheduled for completion, which should go a long way to address the current imbalance of supply and demand in the UK. Generally speaking, our latest research shows a robust picture, with continued demand for space from retail and 3PL operators driving rental growth.”