Global real estate advisor CBRE has published its UK Logistics Market Summary for Q1 2022.
Despite experiencing a quieter quarter in terms of logistics take-up in Yorkshire and the North East, with only 1 build-to-suit deal of 0.4m sq ft completing, a strong pipeline of deals is anticipated with the second largest amount of space under offer compared to other UK regions. The region concluded the quarter at 5.8m sq ft with 3 build-to-suit units over 1m sq ft.
Despite Yorkshire & North East having the lowest vacancy rate in the UK at just 0.94%, the region has increased QoQ from 0.55% with availability increasing by 52% QoQ reaching 2.3m sq ft. Take-up is predominantly made up of speculative under construction spaces.
Nearly all UK regions have experienced rental growth throughout Q1 with Yorkshire and North East climbing to £7.75psf, a 24% YoY rise. Prime yields within the region hardened 10bps to 3.65%.
Across the UK, highlights included the development pipeline, which was up 36% QoQ to 28.3m sq ft and there were record high levels of speculative under construction space, 14.97m sq ft at the end of Q1, though 5.9m sq ft of this space had already been taken by the end of the quarter.
Nationally, take-up of logistics space totalled 10.43m sq ft in Q1 2022, representing an increase of 100% compared to Q1 2021’s figure of 5.21m sq ft. The South East and the East Midlands captured the largest shares of UK take-up, whilst unusually Yorkshire and North East captured the smallest share.
A total of 41 deals have completed nationally this quarter, a 64% increase compared to Q1 2021 stats, which saw 25 deals complete. The quarter ended with a record level of space under offer, 22.46m sq ft, a 132.7% rise from the end of Q4 2021, suggesting a busy year ahead for the sector. 42% of space taken fell into the smaller size category of 100k-300k, whereas there were 5 deals exceeding 500k sq ft, equating to 29% of total take-up.
Mike Baugh, senior director for CBRE Leeds, said: “The supply forecast is positive with circa 9m sq ft of space coming to the Yorkshire market over the next few years. This may sound a lot, but it only equates to two-to-three years’ worth of supply. In addition to the imbalance between supply and demand, the sector faces additional challenges including labour availability and the continued rise in construction costs.
“Interestingly, only 5% of take-up came from the online sector for Q1 2022, while other sectors provided a significant amount, including 3PL, showing the diversity in the types of occupiers currently seeking a significant quantity of warehouse space throughout the UK.
“Investors continue to focus on the logistics sector and aligned to occupier requirements, are really driving the ESG agenda leading to some exciting new, best-in-class schemes in our region.”
