Warehouse property take-up reverts to the mean
Logistics and industrial occupiers leased and acquired 8.6 million sq ft of space in the UK during the first quarter of 2023, according to real estate services firm Cushman & Wakefield.
THIS IS the lowest quarterly volume recorded since Q1 2020 but is slightly above the Q1 average of 8.3m sq ft seen from 2010-2019.
Take-up volumes are reverting towards their medium-term average following the rapid expansion driven by e-commerce operators and post and parcel businesses during the pandemic when this segment accounted for as much as 40% of quarterly take-up, as opposed to less than 10% in Q1 2023.
Third-party logistics providers remain acquisitive and accounted for 2.6m sq ft (30%) of the quarter’s take-up, with manufacturing taking 1.4m sq ft (16%).
New space
As take-up has slowed but new space continues to be delivered, availability is also reverting closer to historical levels. Total space available for occupation as units of more than 50,000 sq ft now exceeds 60 million sq ft. Despite a shift in market dynamics, this level still represents constrained supply with availability now equivalent to 1.29 years of take-up, firmly below the 10-year average of 1.6 years. Developers continue to start construction on new schemes, with 21 million sq ft of space currently under construction and due to complete over the next 18 months.
Rents
Following significant increases during 2022, rental growth has begun to moderate. Rent levels have largely remained stable over the first three months of 2023, with some pockets of growth being observed across the market. Meanwhile in the investment market, yields, too, largely stabilised during Q1, with some minor yield compression observed in secondary and peripheral locations hit hardest by the economic shocks during the second half of 2022.
Evolving
The first quarter saw 62 transactions recorded, an increase on the 57 during Q4 2022, although the lot size has been smaller on average than in 2022. Units over 200,000 sq ft accounted for 38% of total take-up in Q1 whereas it accounted for more than 55% of total take-up across 2022.
Demand remains strong for high quality space within best-in-class locations, with the first quarter again confirming the popularity of the logistics Golden Triangle. The West Midlands accounted for the most space taken nationally during the quarter and the North West also remained popular.
