Industrial and logistics take-up is bound for another record year after soaring in Q3, with robust demand from e-tailers and logistics operators pushing availability down to new lows.
Occupier take-up reached 23.7m sq ft during Q3, according to the latest research from Gerald Eve. This surpassed the previous quarterly record of 22.9m sq ft in Q2 this year.
Supply is at a record low of 4.6%, which has helped generate 4.7% prime headline rental growth.
Gerald Eve said supply-demand dynamics have led developers to start 6.4m sq ft of new speculative schemes in Q3, a record for one quarter.
More than 13m sq ft is being developed speculatively in total. Gerald Eve said while that will “go some way to alleviate” the supply shortage, the buildings are “already attracting significant occupier interest and are letting up quickly”.
The agent added that while the outlook for logistics real estate remains positive, rising input costs and shortages of materials and labour are of increasing concern.
Steve Sharman, partner and head of research at Gerald Eve, said: “The recent HGV driver and petrol shortage has highlighted how vulnerable some supply chains are to spikes in demand.
“Many occupiers are now making plans beyond the immediate operational challenges to make supply chains more resilient and agile. These include pivoting away from just-in-time management to more regional or domestic supply chains and increasing the adoption of technology and sustainability in warehouses, all of which will have a knock-on impact on real estate decision-making.”
With 48.9m sq ft taken so far this year, 2021 is on track to overtake last year’s take-up volume of 53m sq ft, according to Cushman & Wakefield. Online retailers accounted for 43% of Q3 take-up.
Investment into warehousing is also on track for a new record, with £10.7bn transacting during the first nine months of the year. This is on par with the record annual volume registered in 2017.
Cushman noted that activity has been “dominated” by overseas investors, mainly US private equity companies, which have undertaken 63% of transactions so far this year.
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