MIPIM 2018: Take-up in the UK warehouse market of units of more than 100,000 sq ft is set to reach 13.1m sq ft in Q1 2018, the highest on record according to Savills and 115% above the long-term average of 6.1m sq ft.
The firm attributes this significant uptick to continued activity by online retailers, which accounted for 42% of occupier activity in Q1. The second highest was the grocery sector with 15%.
Consequently, requirements for units of 500,000 sq ft have skyrocketed. As a result there has been a notable increase in build-to-suit (BTS) units, which made up 71% of transactions compared with just 6% of new build stock.
At present there are only six buildings of more than 400,000 sq ft currently available, two of which are already under offer. What’s more, all are second-hand supply, with the notable exception of Gazeley’s Altitude unit in Magna Park. For this reason, occupiers are having to build their own stock in order to fulfil their supply chain needs and remain competitive in an increasingly crowded market.
Richard Sullivan, national head of industrial & logistics at Savills, said: “We have seen a phenomenal amount of take up in Q1, as occupiers resume activity following a slow final quarter in 2017. Amazon aside, both ASOS and Pretty Little Thing are rumoured to be taking space, whilst Internet Fusion, a sustainable e-commerce platform, has already confirmed a deal at Prologis Park in Kettering.”
Notwithstanding the activities of online retailers for whom speed to market is key, Savills has seen an increase in BTS units across all sectors. An example of this being Lidl’s recent announcement to build a 1m sq ft distribution centre in Houghton Regis in Dunstable.
This is in contrast to last year, which saw a significant reduction in BTS from the record take-up levels of 2016, dropping from 18m sq ft to just 11m sq ft in 2017.
However, with take-up of BTS in Q1 2018 already at 9.3m sq ft, Savills predicts strong ongoing activity in the industrial and logistics market moving forward.
Kevin Mofid, head of industrial research at Savills, added: “The resurgence of occupiers taking BTS units is a good indicator of demand and highlights the lack of supply we currently have in the market, especially for units of 500,000 sq ft +.
“What’s more, it also points to a shortage of modern good-quality stock available, which is essential especially when it comes to the ever evolving nature of retailers supply chains.”
Savills is co-hosting more than 400 guests at this year’s Shedmasters event in Cannes.
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