Some 45m sq ft of industrial and logistics space was leased in the UK during 2022, down by just over a third on the record-breaking high seen in the previous year, according to the latest research from Knight Frank.
Take-up has fallen by around 35.7% on last year’s record 70m sq ft, researchers found. However, this year’s figure is 8% above a 10-year sector average.
Leasing activity during Q4 2022 reached 7.2m sq ft, continuing a trend of slowing take-up since a peak of 21.5m sq ft in Q3 2021. Knight Frank said this was partly down to a lack of availability in key markets.
Vacancy rates have narrowed to 3.7% as of Q4 2022, from 3.2% at the end of 2021. This stayed below the 5.2% vacancy rate recorded pre-pandemic, which Knight Frank said reflected the resilience of occupier demand. At the end of 2020, the logistics vacancy rate stood at 4.4%. At the same point in 2012, it sat at 12.5%.
Average rental growth across the sector is predicted to be 4% in 2023.
Some 32m sq ft of new space was delivered over the year, according to the firm’s findings. However, with new stock quickly being absorbed into the market and higher construction costs reducing the viability of development in some locations, Knight Frank predicted that supply will remain tight into 2023, particularly for well-located, grade-A facilities.
Claire Williams, industrial and logistics research lead at Knight Frank, said: “Higher development and financing costs are likely to curtail development activity and the UK’s supply demand imbalance is set to persist into 2023.
“Though the sector is facing economic headwinds, the increasing diversity of the UK industrial and logistics occupier base will provide a breaker against these. This combination of factors will drive further rental growth in 2023.”
Charles Binks, industrial and logistics department head at Knight Frank, said: “Knight Frank continues to see enquiries for industrial and logistics space holding up, particularly from manufacturing and distribution firms, especially third party logistics firms.
“The reshoring or onshoring of manufacturing, the need to hold more stock and rising demand from less traditional occupiers, such as vertical farms and data centres, is continuing to spur demand for well-located, best-in-class space across the UK.”
To send feedback, e-mail pui-guan.man@eg.co.uk or tweet @PuiGuanM or @EGPropertyNews
