Take-up of UK logistics space hit 11.1m sq ft in Q3 – up 12% on Q2 take-up, but around 25% lower than a year ago, according to the latest figures from Gerald Eve.
Manufacturers were particularly active in Q3, which Gerald Eve attributes to the nearshoring of operations or as part of measures to improve supply chain resilience, in addition to the natural churn caused by lease events.
The availability rate increased to 5.9% in Q3 – up from 5.4% in Q2 – due to additional speculatively built stock rather than an increase in unwanted secondhand space. Sub-lets accounted for 14% of all Q3 availability.
Josh Pater, partner at Gerald Eve, said: “Occupiers are successfully navigating the current more challenging operating conditions. Nevertheless, making property decisions in such an uncertain time is even more difficult now than a few years ago. Tenants are doubling down on the fundamentals – implementing resilience in supply chains, and looking for cost savings wherever possible.
“Energy-efficient buildings which offer true cost savings and in locations with attractive labour pools and future-proofed power provision offer more leeway in occupier affordability. These kinds of buildings are driving the prime rental market.”
Prime logistics rents increased by 1.4% on average in Q3, with headline prime rents up by 6.6% over the past year. Gerald Eve said there was still investor interest in the sector, especially at the prime end of the market.
Nick Ogden, partner at Gerald Eve, added: “Prime logistics pricing has effectively held steady for the last six months, with investor demand focused on prime stock where supply has been limited. Forward interest rate expectations are now lower and less volatile, and secondary assets remain liquid, but investors are allowing for more capex linked to MEES.
“For now, there’s still a lack of forced sellers across the spectrum, so buyers are expected to be faced with a limited pool of stock, and Q4 volumes are likely to remain well below the last couple of years.”
