Take-up of large industrial and logistics units (of 100,000 sq ft +) slumped 40% last year, according to Savills’ latest Big Shed Briefing.
The total annual take-up of large units of 29.1m sq ft recorded in 2023 was still 12% above the pre-Covid average. However, take-up of units of more than 500,000 sq ft fell 61% to 7.32m sq ft and the number of build-to-suit deals also fell, to the lowest level since 2015.
Over the last 12 months, supply has risen 90% to 49.57m sq ft, reflecting a vacancy rate of 7.15%, with much of the increase attributed to a rise of occupier-controlled stock in addition to 18m sq ft of speculative completions in 2023. The volume of Grade A supply has increased to 58% of the total – the highest level ever seen.
The East Midlands, West Midlands, Yorkshire & Humber and the North East currently have less then one year of available stock and the total development pipeline now stands at just 12.63m sq ft due for delivery in 2024 and early 2025.
Kevin Mofid, head of industrial and logistics research at Savills, said: “Although take-up in 2023 fell by 40% when compared to 2022’s figure, it is positive to see that it remained 12% above the pre-Covid average. The market has undoubtedly been impacted by macro-economic events, which has seen occupiers take a more cautious approach when it comes to acquiring space.
“This has seen vacancy creep up to 7.15%, however, with speculative announcements also falling and take-up for existing units remaining strong we anticipate vacancy will start to decline as the year progresses allowing for continued rental growth as pocked of under-supply remain across various key UK markets.”
Manufacturers accounted for 29% of take-up – the highest level seen since 2017 – 3PL’s accounted for 26% and online retailers accounted for 12% of take-up.
Richard Sullivan, national head of industrial and logistics at Savills, said: “There is no doubt that 2023 was a challenging year for real estate in general. The highest interest rates for over 15 years, along with stubbornly high inflation saw investment and occupier activity cool in the UK logistics market. What’s clear is that occupiers are no longer in growth mode and are now more driven by strategic decision making governed by upcoming lease events and a desire to improve their ESG credentials.
“This has meant that whilst there are a sizeable number of requirements in the market, decision making is more protracted. Looking ahead, there are early indications that the consumer economy remains in reasonable health, which along with strong online retail figures, suggests we could see businesses become more acquisitive as the economic picture improves.”
