Demand for UK logistics and industrial space shows no sign of slowing as transactions in the first quarter of 2021 increased by 115%, according to the latest figures from Cushman & Wakefield.
The firm said that the number of deals completed during the period was also 70% higher than a typical Q1.
Cushman’s figures show that 12.5m sq ft of industrial and logistics space was transacted in the first quarter of the year, with the majority deals (94%) on existing stock. A further 16m sq ft was under offer at the end of March 2021, with e-commerce accounting for more than 50% of the total.
During the 12 months to March more than 58.3m sq ft of logistics space has been taken, compared to an annual average take-up pre-Covid of 33m sq ft.
Retailers, parcel delivery and third-party logistics firms continued to drive demand, together accounting for almost 70% of quarterly take-up. In London and South Wales, several recent requirements continue to emanate from film studios. In and around London they have taken nearly 1m sq ft since 2019.
Most regions performed reasonably well, with the North West as the stand-out performer, recording its strongest Q1 on record with 3.1m sq ft transacted. The largest deal of the quarter was Amazon’s letting of more than 700,000 sq ft at Knowsley Business Park.
Cushman’s data reveals that 12.7m sq ft of speculative space has already been delivered or is due to complete later this year. Despite this pipeline, availability fell by 18% year-on-year during Q1 to 60m sq ft and remains 11% below the long-term average. In Yorkshire and the North West, availability is down by nearly 30% year-on-year, and by more than 40% in the West Midlands. Most regions remain historically supply-constrained, with further rental growth expected as a result.
Richard Evans, head of UK logistics and industrial at Cushman, said: “With more than 16m sq ft of space currently under offer at the end of the first quarter, 2021 is shaping up to be another strong year for the logistics and industrial sector and developers have been quick to respond to the recent surge in demand. The market response to the pandemic and ensuing lockdowns has boosted confidence, evidenced by many new speculative developments across the country.”
In terms of investment, demand for industrial has almost doubled in Q1. Cushman found that some £2.7bn of logistics/industrial property changed hands during the first three months of the year, compared with £1.5bn in Q1 2020. Overseas investors – led by North American private equity money – remained acquisitive and accounted for more than 65% of transaction volumes.
Cushman’s logistics and industrial capital markets partner Ed Cornwell said: “Established overseas investors continued to grow their UK logistics exposure with some big ticket deals, but we are also seeing recently formed ventures/vehicles starting to deploy capital, with a focus on shorter term income/development. For the remainder of the year, we have visibility over an additional £4.7bn of transactions, meaning that 2021 will surpass the £8bn seen in 2020.”
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