Industrial and logistics take-up fell in 2022, but remains 8% above the 10-year sector average, according to new data from Knight Frank.
Over the course of this year, 45m sq ft of I&L space was leased, which is lower than the record breaking 70m sq ft recorded in 2021.
Take-up in Q4 dropped to 7.2m sq ft, which Knight Frank said was due in part to the lack of availability in key markets. Vacancy rates rose from 3.2% at the end of 2021 to 3.7% in Q4 2022, but they remain well below the 5.2% recorded pre-pandemic.
Due to the ongoing supply demand imbalance, development activity increased over the course of 2022, with 32m sq ft of new space delivered this year.
However, this new stock has been quickly absorbed by occupiers and thanks to higher construction costs impacting on the viability of developments in some locations, Knight Frank predicts supply will remain tight in 2023, particularly for well-located, Grade A facilities. The agency anticipates average rental growth across the sector will be 4% next year.
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, added: “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 re-shoring or on-shoring 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.”
