Thursday, September 21, 2023

Another record breaking half year for UK logistics take up with Yorkshire and NE capturing significant share

The latest research from global real estate advisor, CBRE, shows that take-up of UK logistics space climbed to new highs of 22.56m sq ft in H1 2022, representing an increase of 10% compared to H1 2021, which saw take-up total 20.5m sq ft. Yorkshire & North East remain at the forefront of the take-up capturing a 16.8% share.

Yorkshire & North East saw a significant increase in take-up in Q2, increasing almost seven times QoQ, reaching 3.4m sq ft. This was predominantly due to the completion of two large Build-to-suit deals totalling 3.1m sq ft. Take-up in H1 was widespread with the West Midlands capturing the largest share at 21.9%, closely followed by East Midlands, North West and Yorkshire & North East.

Availability in the region was down to 1.6m sq ft at the end of Q2, a drop of 33% QoQ, with 51% of space comprising speculative units under construction. Big box prime rents remained stable at £7.75 psf, with prime yields moving out 25 bps to 3.90%.

As well as achieving record-breaking take-up volumes, the first half of the year has also seen the UK vacancy rate drop to a new low of just 1.18%, showing the acute lack of available stock in the market. Yorkshire & North East was the only region whose vacancy rate increased in Q2 moving to 1.07%, albeit still below the UK average.

Across the UK, a total of 80 deals completed in the first half of the year, mirroring that of H1 2021. However, 64 different occupiers took logistics space in H1 2022 compared to 53 for the same period last year, showing a wider mix of occupiers securing units.

Whilst the number of deals completed has remained consistent with the same period last year, there has been a significant shift in take-up levels by sector. For H1 2022, third-party logistics accounted for the largest percentage of take-up at 27.6%. Manufacturing accounted for 15%, followed by online retail at 13.6%. This is a large decrease when compared with the first half of 2021, which saw online retail account for 42% of take-up, demonstrating that the reduction of online demand has not impacted overall take-up volumes.

In an attempt to accommodate the ongoing levels of demand, build-to-suit accounted for almost half of total take-up for H1 2022 at 46.9%. Speculative followed at 33.3%, with secondhand accounting for the remaining 19.8%.

Mike Baugh, senior director at CBRE Leeds, said: “We are pleased to see Yorkshire and North East remain at the forefront of the UK logistics take-up for H1 with the region seeing a significant increase in take-up in Q2. The increased take up during this quarter reflects the strong pipeline of deals coming to fruition, despite a quieter Q1. Furthermore, the long-term supply forecast remains positive with circa 15M sq ft coming to the Yorkshire market over the next few years.”

Paul Farrow, head of UK logistics at CBRE, said: “Over the last two years, online retail has been the dominant force behind the rising demand for logistics space as a result of the recent e-commerce boom. However, the pendulum has swung and the shift in both occupier type and regional spread of take-up shows the true depth of the UK logistics market.”

Annabel Nash, senior analyst, UK logistics research at CBRE, added: “This is the fifth quarter in a row in which take-up has exceeded 10m sq ft, showing the fundamentals of the sector remain strong. The current availability of built vacant units represents just 47 days of supply and with the UK vacancy rate continuing to fall, we anticipate further upward pressure on rental levels.”

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