Occupier take-up of industrial and logistics space in the UK was the second highest on record last year, despite subdued activity in Q4, according to the latest data from Lambert Smith Hampton (LSH).
Total take-up in 2022 hit 60.5m sq ft, but LSH said the ‘frenetic pace of leasing activity is unlikely to continue into 2023 as the additional demand for space created by the pandemic has now receded and we are now experiencing more normalised leasing conditions’. This shift was underlined by Amazon’s leasing activity in 2022, with the online retailer racking up just 1.5m sq ft of deals compared with the whopping 13m sq ft it completed in 2021.
Richard Meering, national head of industrial leasing at LSH, said: “The move towards more sustainable patterns of leasing should come as no surprise, nor offer cause for alarm. The pandemic-fuelled rush for space has steadily given way to a more settled and balanced phase and, while activity did slow appreciably in the latter part of 2022, improving certainty in the economic outlook should lead to improving activity as 2023 progresses.
“It seems likely that the theme of 2023 will be a flight to quality, rather than a gold rush for new space. The bulk of market activity during the past year has centred on prime stock and this looks set to continue as occupiers seek to fulfil their ESG obligations and mitigate rising energy costs by taking on only the most efficient properties.”
LSH said that in the investment market greater clarity around interest rates and the economic outlook led to a ‘growing sense’ price corrections had completed and that investor appetite was improving and would be supported by a positive rental outlook.
Alex Carr, national head of industrial investment, said: “While there can be no doubt that the investment market has cooled, those waiting for any further pricing adjustment may be disappointed given that we are already beginning to see evidence of prices hardening. The market remains conducive for further rental growth, while the prospect of renewed yield compression can’t be ruled out, so there is plenty to play for. This is backed by the weight of money targeting the sector and the general consensus that it remains a go-to sector.”
