Approximately 8.7 million sq ft of speculatively developed space was under construction by the end of January 2019, indicating this year’s total amount of completed warehouse space could potentially surpass 2016’s previous record of circa 9 million sq ft, according to the bi-annual Spec Map published by global real estate advisor Colliers International.
This figure is measured across 39 distribution warehouses above 100,000+ sq ft and suggests 2019 will be a stand-out year for speculative development activity.
Coinciding with the publication of Colliers’ Spec Map is the company’s Rents Map, which charts the growth change of prime rents, secondary rents and land values across the last seven years across 120 locations in the UK and Ireland.
Key findings from this latest research suggests UK prime rents for multi-lets have increased by 6.6 per cent year on year, led by growth in the London (+10 per cent), West Midlands (+9 per cent) and South East (+8 per cent) markets. The current rental average in these locations is £9.68 psf, with the highest rent being achieved in Park Royal at £20 psf.
Rents for Grade A units over 100,000 sq ft in the UK are up by an average of 3.7 per cent year on year, with London, the South East and East Midlands enjoying the highest rental increases of 8-, 6- and 5 per cent respectively.
While rents for Grade A units over 100,000sq ft showed growth, the pace has slowed when compared to the 4.4 per cent year on year growth witnessed for the previous 12-month period. On the other hand, multi-lets’ annual rental growth accelerated to 6.6 per cent year on year, compared to the 5.5 per cent annual growth witnessed on the corresponding period the previous year.
UK land values have also increased significantly by 26.2 per cent year on year, led by London (+60 per cent), West Midlands (+51 per cent) and East of England (+35 per cent).
Len Rosso, Head of Industrial & Logistics, Colliers International, said: “While uncertainty around Brexit continues, in the Industrial & Logistics sector we are witnessing almost record levels of take-up as occupiers compete to future-proof their supply chains.
“In 2018, the retail sector accounted for a record breaking 54 per cent share of total take-up as the change in consumer behaviour continues to drive demand. Combined with growing land prices, this high level of occupier demand is putting upward pressure on rents and is encouraging developers to build speculatively.”
Andrea Ferranti, Head of Industrial & Logistics Research, Colliers International, said: “A combination of a lack of supply and buoyant market activity has meant that prime rents in England, for both small and bigger sheds, increased significantly in 2018. More specifically, as occupiers were left with limited options to secure their properties in 2018, the gap between prime and secondary rents narrowed further as inflationary pressure on secondary rents reached 11.7 per cent for the two industrial sub-sectors. The industrial sector has had two stellar years in terms of investment performance, and we fully expect this the sector to remain a top-performer in 2019.”