Research by CBRE into the UK logistics property market shows that rents have grown fastest in the Inner South East region has seen significant increases with M25 West, M25 East, M25 North and M25 South achieving rental growth of 25%, 35%, 36% and 83% respectively over a five-year period to Q2 2021.
The M25 West achieved a record breaking £17.50 a sq ft in Q2 2021, the highest in the UK, signalling that demand for Greater London locations remains strong as urban facilities move up the priority list for occupiers.
Rental growth has been driven by lack of available stock and increased competition, pushing occupiers into less desirable secondary locations.
The scarcity of available XXL big-box units (500,000+ sq ft) is also a driver in the flurry of activity in the smaller big-box units (100,000-300,000 sq ft), CBRE said. As a result smaller units have accounted for 71% of transactions in the first half of 2021.
It comes as no surprise that 81% of speculative units under construction are smaller big-box units. These units are easier and quicker to construct due to costs and available land, meaning smaller units are likely to remain a key theme for the immediate future.
Jonathan Compton, Senior Director, Industrial & Logistics at CBRE, said: “Although developers are reacting positively by speculatively building more warehousing, around one third of the units being built are either let or under offer. The construction pipeline is insufficient to meet the strong occupier demand which will result in a demand supply imbalance in the foreseeable future if developers don’t act.”