Demand for UK logistics and distribution space reached record levels in Q3 2020 as retailers and 3PLs expanded their supply chains in response to the pandemic, research reveals.
According to Cushman & Wakefield, the third quarter of the year was the busiest on record with 16 million sq ft of space transacted, nearly double the ten-year average for Q3 of 8 million sq ft.
The figures indicate a further acceleration in demand for logistics and distribution space to keep pace with the boom in e-commerce.
In total, e-commerce has accounted for 40% of take-up so far this year – an all-time high – with related sectors including meal kit operators, parcel delivery and fulfilment companies also expanding.
Reflecting the ongoing pandemic response, several short-term requirements have developed into long-term commitments during the quarter, including Supply Chain Co-Ordination (NHS/Clipper Logistics) leasing 536,991 sq ft at DIRFT in Northampton on a 5-year term for PPE storage.
The data also shows that take-up for the first nine months of the year reached 35.5 million (excluding 3.7m sq ft of short-term deals) with a further 11.5 million sq ft currently under offer. It means that take-up has already outstripped the full-year take-up for 2019 of 33.2 million sq ft with 2020 on course to set a record for take-up.
Take-up in Yorkshire in Q3 reached 800,836 sq ft taking total take-up for the first three quarters of 2020 to 4.97m sq ft.
“Take-up in Yorkshire for the first three quarters of the year reached almost 5 million sq ft which is already the highest take-up year on record and well above the long-term average. Whilst take-up demand has been driven by e-commerce, with Amazon continuing to take significant space, there is a healthy mix of occupier types,” said Dave Robinson, Partner, Logistics & Industrial at Cushman & Wakefield in Leeds.
“We see continued demand and with limited new product coming to the market, we expect to see a supply demand imbalance for the foreseeable future. As well as standing stock there is also a lack of deliverable sites coming forward and we expect to see occupiers struggle to satisfy demand in several locations.”
Bruno Berretta, Associate Director, UK Industrial & Logistics Research and Insight at Cushman & Wakefield, said: “Whilst the pandemic has taken centre stage over the last few months, investors and occupiers are now starting to turn their attention towards Brexit.
“Although the outcome of ongoing negotiations is uncertain, and some sectors such as manufacturing are arguably more vulnerable to a ‘hard’ Brexit than others, the market is about to enter some potentially disruptive months in good shape.
“Demand has proved resilient and supply is in line with its long-term average and 30% below its post-GFC peak.”
From an investment perspective, volumes recovered some of the lost ground during Q3, rising 77% quarter-on-quarter to £1.65 billion, on a par with Q3 2019. As a result, at £4.0bn, transactions year-to-date are now only 8% below 2019 levels.
However, the research also revealed that the number of deals is down sharply by 45%, suggesting that larger deals have retained their market appeal as certain investors continue to scale up. Overseas investors account for almost 50% of total investment so far this year.