Industrial rents continued to rise during the first half of 2023 despite a slowdown in occupier take-up, according to Colliers.
MSCI data shows average warehouse rents rose 1.8% in Q2 and in H1 2023 increased 3.7%. Colliers is now predicting rents will rise 5% this year.
Len Rosso, head of industrial and logistics at Colliers, said: “While there’s no denying that due to economic uncertainties, especially the continued interest rate rises, that the industrial market is slower at the moment. However, despite these factors there are still strong fundamentals which are resulting in rents continuing to rise.
“The heat of demand from occupiers has slowed from the pandemic race for space, but there’s still headwinds which are going to impact the amount of Grade A stock available to occupiers, and so we forecast that rents will continue to rise this year.”
The amount of available industrial space has already increased this year and with a further 8.4m sq ft of speculative supply under construction and due to complete by the end of this year, or in Q4 2024, it is anticipated the amount of available space will increase over the coming months.
Andrea Ferranti, head of industrial and logistics research at Colliers, said: “While it looks like there may be a glut of new supply at the moment, this is coming on stream following a period of record low of available space.
“Watching the moves of investors and developers we can see that speculative construction starts are slowing dramatically, as everyone is mindful of several factors such as; the current cost dynamics of construction; uncertainty around exit yields; elevated borrowing costs; as well as occupier demand slow down. While there’s some projects currently under construction, we can expect to see a peak in space availability in the next six to nine months, before becoming more constrained again in 2024 – which will also mean that rents continue to rise into next year.”
