Take-up in the UK Logistics market continued to perform strongly in the third quarter following an exceptionally strong first six months to the year according to CBRE, the world’s largest real estate advisor. The data, which tracks the higher quality, larger warehouses of over 100,000 sq. ft. and a minimum eaves clearance height of 10 metres, states that take-up in Q3 was 4.266M sq. ft. in 20 transactions. Of this, 36% were buildings that had previously been occupied and 64% being brand new.
The past three years have witnessed a surge in logistics take-up from online retailers. In the first six months of 2018, they took 32% of space. However, in Q3 their share reduced to around 13% with the greatest representation being from the Third-Party Logistics operators (3PLs) at 35% in eight deals followed by food retail at 23%. From a geographical perspective, the East Midlands has again been the strongest with 32% of take-up in 6 transactions. However, other regions have also performed well with the remaining space spread principally throughout the South East, North West and Yorkshire & North East.
To put 2018’s performance into perspective, take-up to the end of September was 21.83M sq. ft. in 72 deals. Comparing it to the record year of 2016, at the same stage take-up stood at 22.46M sq. ft. in 84 deals. However, the key difference is that there is currently 5.11M sq. ft. under offer in 19 buildings which is significantly more than at the same stage in 2016. CBRE is also aware of a number of requirements for large amounts of space that have good prospects of transacting this year. As such, the record level of 29.3M sq. ft. in 2016 could be under threat.
Availability of space in the UK, excluding the under-offer units stands at 28.2M sq. ft. in 132 buildings which represent around 12 months’ supply on current take-up levels. Of that, there are currently 45 speculative buildings being constructed which amounts to 9.14M sq. ft.
Jonathan Compton, Head of UK Logistics Strategy at CBRE comments “We have seen the logistics sector continue to perform well from both occupational and investment perspectives and expect that to continue. The demand and supply imbalance remains an issue. The planning system is not helpful in enabling developers to be flexible and provide warehouses quickly. However, there a number of new speculative schemes coming onstream with an unprecedented number of 500,000 sq. ft. plus warehouses currently being speculatively built.
“Looking forward to the remainder of this year and into 2019 we anticipate seeing more of the national high street retailers looking to take additional warehouse space as they actively grow their online platforms”.