JLL’s second annual UK Industrial Market Tracker report reveals that industrial real estate agent sentiment remains positive. Supported by independent performance data and JLL’s own model-based forecasts, the Industrial Market Tracker spotlights the fundamentals that help to clarify why the industrial sector has performed so well.
Andy Harding, lead director JLL’s Industrial & Logistics Group, said: “The industrial market had a stellar year in 2017 and became the standout sector among the main commercial property types. From an investment perspective, the sector outperformed and our latest forecasts suggest this trend looks set to continue over the next four years.”
Other highlights of JLL’s UK Industrial Market Tracker include:
- The level of demand was broadly stable in 2017 compared with 2016 in eight out of 11 regions, higher in two (the North West and North East) and lower in only one (Yorkshire & Humberside).
- No regions reported a pick-up in supply, partly reflecting very low levels of speculative development taking place across the market.
- At the start of 2017 there were 65 industrial and big box logistics schemes speculatively under construction nationally totalling 7.1 million sq ft. One year on around 26% of this floorspace had been taken up – a lower proportion than expected given strong market sentiment and the low overall levels of supply nationally.
- Some regions saw a very good level of demand for speculative space: in the North West 87% of the floorspace under construction at the start of 2017 had been taken up by the start of 2018. In the North East the corresponding share was 46%, in the South East, 38% and the East Midlands, 36%.
- A combination of robust, but stable demand, very low supply, and generally healthy interest in new speculative development, generated significant rental growth across the market in 2017. In the Greater South East (South East, East and London regions) where JLL monitors 21 locations, average headline rental growth hit 11.4% last year.
- Over the next six months, agents anticipate a similar pattern across regional markets with steady demand expected in nine of the 11 regions and a higher level in the North West and West Midlands. Take-up is expected to remain constant in eight of the 11 regions, to be lower in Wales and higher in the North West and North East.
- In January 2018, JLL recorded a total of 62 schemes speculatively under construction nationally totalling 7.2 million sq ft, of which 3.9 million sq ft was in big box logistics units of 100,000 sq ft plus and 3.3 million sq ft in smaller units. The amount of floorspace speculatively under construction at the start of 2018 was at a comparable level to the start of 2017 and given that only 3.3 million sq ft of floorspace was being developed in units under 100,000 sq ft nationally it is unlikely to impact overall void periods.
- Standard industrial rents in London and the inner South East are expected to see the strongest rental growth with uplifts of 6.6% and 5.6% respectively for 2018.
Jon Sleeman, lead director JLL’s EMEA Logistics & Industrial Research, concluded: “JLL’s industrial agents believe the UK industrial market is robust and resilient and our research supports this sentiment. We believe the sector should continue to favour investors and developers with London and the South East especially standing out as offering the best performance prospects.”