BITA President David Rowell looks at a report highlighting the return of speculative warehouse building as the economy takes off - and the potential this holds for forklift sales.
A recent report from property company DTZ* has highlighted that the take up of 8m sq ft of ‘Grade A’ industrial property in the first half of 2014 was the highest half-year figure on record. When all grades are examined, the figure is 15.9m sq ft, the largest amount since H1 2010, with the retail sector particularly strong.
These figures reflect how the UK economy is really powering ahead across all regions.
Supply of high-quality space is not keeping up with demand, pushing up rents and prompting developers to return to build warehouses and industrial property speculatively in several regions. In London, the South East and East, and the Midlands, this is particularly prevalent, with large developments in Northampton, Warwickshire, the London Gateway and Dunstable.
The North West and the West Midlands are other ‘hotspots’ where speculative development is also forecast to take off. The North West in particular has the lowest proportion of grade A availability and has already experienced a significant rise in rents, with headline rents in Manchester rising by 13.65% over the course of 2013.
Retail property demands
Demand has been driven largely by a resurgent retail sector which contributed around half of the total UK take-up of industrial property. This is the highest proportion the sector has taken since 2010 after four years of reduced take up. The logistics sector’s contribution dropped to 20% of take-up in H1 2014 as requirements, led by logistics and parcel companies expanding due to the huge growth of online retail, have in part been satisfied for now although it is expected to resume growth in due course.
Even in regions where new space is already coming online, rents for Grade A space are expected to rise as demand outstrips supply, particularly in areas such as Newcastle, Leeds, Bristol and Birmingham, where rents are forecast to rise by more than 2% per year by 2018.
Following the doom and gloom of the last few years, this is quite a turnaround and a real confidence boost for the whole of the economy – including the fork lift truck industry.
At the BITA AGM in May, the 2014 Forklift Market Outlook produced for our members by Oxford Economics upgraded its forecast for UK GDP growth upward from 2.2% to 3%. As a result, it also forecast an overall increase in orders for all fork lift trucks of 9.3%.
The figures contained in the DTZ report back-up Oxford Economics’ optimistic outlook – and the latest figures we have seem to show that we are actually exceeding the anticipated sales increase in fork lift trucks.
Based on actual orders during the second quarter of 2014 (derived from BITA’s member-only database of industrial truck sales statistics), there’s been a 6% increase in orders from Q1 2014 to Q2 2014, yielding a total of 15,261 orders for the first half of 2014. Based particularly on strong warehouse sales, that’s a 15% increase from the 13,227 orders registered between January and June in 2013. This means that potentially we could be looking at a 2014 total of over 30,500 orders – 5% higher than the 2014 forecast.
There is still some weakness around the figures for industrial production and construction, but warehouse orders, again seeming to correspond with the figures produced by DTZ, enjoyed a 31% rise from 3,363 in Q1 to 4,389 in Q2. This is all a far cry from 2009 when total fork lift truck orders dropped below 18,000.
The warehouse and industrial property figures identified by DTZ are very encouraging – where there are warehouses there are forklifts! We are still not back to the 32,000 order level experienced in 2007 but there can be no doubt that we are now moving strongly in the right direction.