Diverse range of occupiers drive the UK warehouse market as take-up continues to reach record levels

According to Savills latest Big Shed Briefing, take up of industrial & logistics space (units over 100,000 sq ft) hit 16.07 million sq ft (1.492 million sq m) in H1 2019, 28% up on the long term average for the first half of the year. Evidence of a more diverse occupier landscape has continued to dispel the Brexit myth of a perceived lack of activity due to uncertainty.

In fact, Savills notes that there were 71 transactions in H1 2019 compared with just 59 in the corresponding period last year. What’s more, Q2 saw more than 9.55 million sq ft (887,224 sq m) transacted, making it the highest level of Q2 take-up since 2014 and the second highest on record.

In contrast to previous years, take-up in H1 2019 has not been as dominated by ecommerce, falling from 27% in 2018 to 17% in the first half of the year. Instead occupiers from a broad range of industries are taking a more equal proportion of space. For example, despite negative headlines, Savills has seen high street retail account for 11% up from 7% last year, which can be attributed to structural changes within the retail sector as businesses look to get their supply chains in good order. Key deals include Next taking 322,335 sq ft (29,945 sq m) at Waltham Abbey in the South East and Urban Outfitters committing to build a 432,000 sq ft (40,134 sq m) bespoke unit at Peterborough Gateway. This also accounts for the significant increase in take-up by 3PLs, who have taken the highest proportion of space so far at 31%, up from 17% of all space leased in 2018.

Other sectors include wholesale, which has jumped to 9% compared with 3% last year and food production growing from 4% to 6%, with key deals including VBites acquiring 370,282 sq ft (34,400 sq m) in the North East to manufacture vegan snacks. The ‘other’ sector, which Savills defines as non-conventional warehouse occupiers such as data centre operators, accounted for just 1% of take-up in 2016, but now accounts for as much as 7% of all space leased so far in 2019.

In regards to supply, and arguable in response to media scaremongering around Brexit stockpiling, Savills figures show that stock has risen in 2019 and now stands at 34.14 million sq ft (3.171 million sq m). This still reflects a national vacancy rate of just 6.62%, falling as low as 3.8% in the South East, however at present there are a further 34 units under construction totalling 7.15 million sq ft (664,256 sq m). Overall, demand remains strong and take-up is expected to exceed 30 million sq ft (2.787 million sq m) by the year end.

Richard Sullivan, national head of industrial & logistics, comments: “2019 has so far been dominated by talk around the implications of Brexit, including stockpiling, preparations for a no deal and the consequential impact on the UK warehouse market. At Savills, we believe that Brexit has had little impact thus far on occupier demand and activity and there are instead far more important factors driving the market, such as structural change in the retail sector and the continued growth of ecommerce. Also, with occupiers from more diverse industries taking a more equal proportion of space, this points towards a good overall economic story.”