A second research report has confirmed a slide in demand for big sheds as economic uncertainty and high exchange rates begin to bite.
The data comes as Segro – moving into the UK big box market for the first time – announced strong results, with pre-tax profits up 23 per cent as they embark on a £350m development programme.
According to JLL take-up of warehouse floorspace was down 35 per cent in the first half of 2017 compared to the second half of 2016.
In a sign that occupiers are pulling in their horns, the supply of brand new Grade A warehouse floorspace rose in the first six months of the year, 24% up on the end of 2016.
Confirming data from Gerald Eve published last week, JLL says that distributors have made few appearances in the market for new floorspace, which has instead been dominated by manufacturers.
Figures from Gerald Eve’s quarterly prime logistics bulletin showed take-up in the second quarter of 2017 down 12 per cent on the first quarter of last year. The total let or occupied was 11.3m sq ft.
Separate data from Colliers International suggests higher exchange rates as diverted consumer spending from imports to UK manufactured goods, pushing up demand for floorspace from manufacturers. Research published this morning shows the supply of vacant space has dropped fast, and there is now sufficient logistics space for just one year four months.
Colliers say that just 17m sq ft of speculative floorspace is under construction, but the total is due to fall fast to just 3.5m sq ft.
Commenting on JLL’s new research UK Research associate director Tessa English said: “Manufacturers were the most active source of warehouse take-up in the first half of this year, making up 35% of the total, but retailers were comparatively subdued. Grade A availability increased over the first six months of 2017, following a pick-up in both new and good quality second-hand supply. Nationally, our vacancy rate ticked up from 5% at the end-2016 to 6% at mid-2017.”
Regionally JLL’s research shows that overall availability of Big Box supply represented a national vacancy rate of 6% during H1 2017. The Greater South East, South West, Wales, North East, North West and Scotland all have vacancy rates below the national average.
JLL UK lead director Logistics & Development Richard Evans added: “Our forecasts suggest that distribution rents overall will grow by 2.9% per annum nationally over the next five years, with growth stronger in core locations.”