Take-up of industrial and logistics space in the UK fell to the lowest level in a decade in the first six months of this year, reveals the latest Big Shed Briefing from Savills.
However, the company said the total take-up figure of 12.5m sq ft [units of 100,000 sq ft+] recorded in the first half [H1] was just 1% shy of the pre-Covid H1 average [Q1 2007 to Q1 2020].
Meanwhile, supply rose to 41.9m sq ft in H1 2023 – an increase of 120% on H1 2022 – reflecting the 9m sq ft of speculative space delivered in Q2 2023 alone, as well as the growing amount of space that occupiers are bringing to the market to sub-let. The current vacancy rate is 6.25%, which is in line with the pre-Covid average of 6.3%.
There is now 21.8m sq ft of Grade A space on the market, which accounts for 52% of total supply – the highest level since 2020. However, Savills expects this to “trend downwards as current supply is leased-up and the development pipeline is not replenished as quickly”.
The take-up numbers fell largely due to the lack of transactions of more than 400,000 sq ft, with just six deals of more than that size completing so far this year. Build-to-suit deals slumped by more than two thirds from 16.2m sq ft in H1 2022 to 5.2m sq ft in H1 2023.
Savills said deal activity will rise in the second half of the year, with enquiry levels rising 64% in H1, driven by a significant increase in demand for units of more than 500,000 sq ft.
Richard Sullivan, national head of industrial and logistics at Savills, said: “As we reach the half way point of 2023, economic data in the UK remains volatile and unpredictable. As a result of inflation, higher costs of capital will impact the market in many ways, with developers finding it hard to fund speculative development. In turn this will constrain pipeline moving forward.
“However, despite uncertainty unemployment remains historically low and consumer confidence, in relation to people’s individual circumstances, remains surprisingly high. This means that occupiers still need to consider the suitability of their supply chains for a market that will continue to grow, notwithstanding the challenges in the short term.”
