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Colliers: UK industrial and logistics take-up on track to exceed the 10-year annual average

Colliers’ research showed that take up activity for Q3 2019 was just shy of 9 million sq ft, for units over 100,000 sq ft, this is up 26% on the same quarter last year, boosted by Jaguar Land Rover who, advised by Colliers, agreed a 2.94 million sq ft pre-let in September.

Of space taken so far this year, design and build accounted for the majority of take up, with 55% of overall activity. Meanwhile, lettings for speculatively-developed units accounted for circa 18% and the remainder 27% share resulted from second hand space.

Andrea Ferranti, Head of Industrial & Logistics Research for Colliers International, explains:

“The sector remains well balanced in terms of supply and demand, with developers seemingly unfazed by the current economic jitters. As a result, we expect newly developed distribution warehouse space in 2019 to have reached 10.7 million sq ft by the end of the year. Consequently, availability, which includes distribution warehouses scheduled for completion in Q4, increased to circa 36 million sq ft, the highest Q3 recording since 2014. Though, it is worth nothing that based on the five-year average take up of circa 30 million sq ft, this indicates that there is just above one year’s worth of supply available in the UK.”

Demand for space from general retail occupiers, which excludes pure-play retail, dropped from 24% in Q1-Q3 2018 to 14% in the same period this year, reflecting the retail sector’s high degree of risk aversion. On the other hand, third-party logistics providers made up 28% share in Q1-Q3 2018, as well as this year.

Meanwhile, rents have continued to feel the pressure, with Colliers forecasting 2019 annual equivalent rental growth of 4.0% for distribution warehouses, 6.9% for UK standard industrial with London Standard industrial outperforming at 7.6%.

Len Rosso, Head of Industrial & Logistics at Colliers International concludes:

“Although the industrial and logistics sector has remained seemingly sheltered by economic headwinds as occupiers have continued, albeit at a slower pace, to seek better and more operationally-efficient distribution warehouses to drive up profitability, those occupiers who can afford to postpone their property-related investment decisions are either extending their leases or resorting to third-party logistics providers to de-risk and increase flexibility.

“Looking ahead, it’s difficult to predict any specific pattern in take up as economic uncertainty makes business planning for the year ahead more challenging. Though one thing is clear, the underlying market drivers and long-term prospects of the sector remain positive.”

james.wallace@realassetmedia.com