There is no end in sight for the shortage of new warehouse floor space in the North West – meaning further hikes in logistics rents. The latest figures from Savills suggests demand will outpace new development in 2016 – leaving the region worse supplied with new units than it started the year.
Despite 2.2m sq ft of new development in 11 schemes – the second largest development pipeline of any UK region – demand is running at 3.44m sq ft a year. Demand reached an all-time high in 2015 at 4.56m sq ft.
Stuart Murray, industrial director at Savills, comments: “Speculative development is very much on the agenda in the North West, with major schemes including Harbert’s H1 and H2 units at Heywood Distribution Park and 360 at Logistics North, Bolton due to complete in the next few months. However, if average take up continues there simply won’t be sufficient supply even given the healthy development pipeline. The big questions now are where will the second tranche of new stock come from and who will the developers be?”
Around 81 per cent of the 5.7m sq ft of existing industrial floorspace is Grade B or C – much of it unsuitable for modern warehouse use. The shortage will continue to push rents up. Kevin Mofid, industrial research director at Savills, said: “The industrial market has shown significant growth over the past 18 months, with prime rents in Manchester increasing by almost 20% from £5.50 a sq ft to £6.50 a sq ft. A combination of constrained supply and increasing build costs have also driven the freehold value of industrial land up considerably and we expect this to continue throughout 2016.”