Take-up of UK industrial and logistics space fell to 8.6m sq ft in Q1 2023, the lowest quarterly volume recorded since Q1 2021, according to new figures from Cushman & Wakefield.
However, take-up activity was still above the 10-year Q1 average of 8.3m sq ft posted between 2010-2019.
Cushman & Wakefield attributed the decline to reduced activity by e-commerce operators and ‘post and parcel’ businesses which during the pandemic accounted for as much as 40% of quarterly take-up, as opposed to less than 10% in Q1 2023.
Third-party logistics providers accounted for 2.6m sq ft (30%) of Q1 take-up, with manufacturing accounting for 1.4m sq ft (16%).
The space demands of occupiers are changing with units of more than 200,000 sq ft accounting for 38% of total take-up in Q1, whereas larger units accounted for more than 55% of total take-up across 2022.
David Binks, international partner in Cushman & Wakefield’s UK logistics and industrial team, said: “Given the current economic trading conditions and challenges facing occupiers, the market has continued to demonstrate its resilience with demand still above the pre-pandemic average. Some occupiers are looking to enhance and intensify their use of existing assets but overall demand for well connected, automated, and carbon neutral facilities is likely to remain firm.
“Manufacturing will be an interesting area to watch in the UK. We are getting more enquiries from manufacturers and production businesses. These projects are often significant and can take a long time to materialise into the construction of physical assets, compared with the more reactionary logistics market, but it is an indicator of what we might be seeing on the ground in two to three years’ time.”
Supply remains constrained with availability equivalent to 1.29 years of take-up – below the 10-year average of 1.6 years. Rent levels stabilised in Q1 2023 following “significant increases” made during 2022.
Yields also largely stabilised in the first quarter of the year with “some minor yield compression observed in secondary and peripheral locations hit hardest by the economic shocks during the second half of 2022”.
Ed Cornwell, international partner in Cushman & Wakefield’s UK logistics and industrial capital markets team, said: “The sector’s rapid repricing has begun to attract investors back to the market, resulting in a cautious improvement in sentiment. Although the risk of another economic shock remains firmly on the radar for all market participants, changes to investment strategy and risk appetite are beginning to bed in as investors adjust.”
