According to the latest UK Logistics Market Q2 2021 study from global real estate advisors, CBRE, the North West saw an increase of 19% on Q1 with take-up of 1.4m sq ft, bringing its half year total to 2.5m sq ft.
Take-up of UK logistics space in Q2 2021 surpassed the record level of take-up achieved in Q3 2020 of 13.3m sq ft to reach a total of 15.4m sq ft, marking the third record-breaking quarter in the past 18 months.
This is more than 20% higher than Q2 2020, which saw UK take-up totalling 12.8m sq ft. Following a quieter, but healthy Q1, the total UK take-up for the first half of 2021 now stands at 20.6m sq ft. This represents a 7% increase when compared to H1 2020, which saw take-up totalling 19.24m sq ft.
Take up in the North West has been predominantly speculatively built units which suggests occupiers are favouring units that are readily available for occupation over the longer lead-in time for build-to-suit developments. However, there are a number of build to suit deals including a pre-let of 835,000 sq ft.
Grade A available space is at an all-time low with currently less than 12 months’ supply of both built and under construction. However, the majority of this has terms agreed and due to complete in Q3 2021 thus leaving less than 3 months’ supply remaining.
Competitive pricing has resulted in a lack of supply within the North West with prime yields in the region contracting QoQ over the past year, now reaching a new low of 3.95%. Only the South East region is lower.
A total of 55 deals across the UK completed in Q2 2021, an unprecedented number of deals to have closed in one quarter, representing a 52% increase compared to Q2 2020 which saw 36 deals close. This brings the total number of deals completed in the first half of 2021 to 80.
The average unit size for Q2 2021 was 279,887 sq ft compared to 388,076 sq ft for the same period in 2020, highlighting that a larger volume of transactions took place across smaller units throughout the quarter.
Yorkshire and the East Midlands dominated at a regional level for Q2 2021, with both regions achieving record-breaking take-up figures over more than 5m sq ft, accounting for 66% of total take-up collectively. This was followed by the West Midlands and the South East at 11%, with the North West region following at 9% and South West at 3%.
Paul Farrow, Head of UK Industrial & Logistics at CBRE said: “The logistics sector continues to break boundaries with no slowdown in sight and given that there is 15.6m sq ft currently under-offer across 43 units, we anticipate that Q3 will follow suit. Occupiers are astute in securing available space as they are becoming increasingly aware of the lack of stock coming to market. Ultimately, the pressure release valve will be in the form of increased rental levels.”
Paul Cook, Senior Director, UK Industrial & Logistics at CBRE Manchester added: “There has been an apparent shift in demand from occupiers towards Grade A space over the past 12 months and the majority of new speculative development has leased prior to practical completion. Furthermore, we have seen a significant increase in rental values in the North West due to pent up demand, higher land values and inflationary pressures on construction costs.”
