Monday 24th Oct 2016 - Logistics Manager

The return of the spec shed?

A shortage of supply in key markets could see the return of speculative shed development during 2012, according to Gerald Eve’s latest Prime Logistics industrial bulletin.

The extent to which the supply of large industrial space has tightened was highlighted by pre-lets and pre-sales totaling 7.35 million sq ft during 2011, equivalent to 22 per cent of total take-up.

Many occupiers seeking prime space in prime areas have acknowledged the reality that design-and-build is often the only realistic option. As a result, speculative development could return in 2012 in anticipation of increased demand in 2013.

Of particular interest to speculative developers will be the net absorption of more than 14 million sq ft during 2011, building on the four million sq ft absorbed in 2010.

Representing the true impact of development completions, lettings and space returned to the market, the absorption of 14 million sq ft in effect reflects the weak levels of development and falling availability volumes in the market.

The overall vacancy rate fell to 15.8 per cent by the end of Q4 2011 compared to 16.8 per cent the previous year.

Richard Ludlow, partner and head of industrial agency at Gerald Eve, said: “Although overall take-up dropped during 2011, virtually every other indicator suggests a market where supply, especially of prime space, is running dry. With improved prospects for occupier demand in 2013 and beyond, this is likely to be the year that sees the first tentative steps in the return of speculative development.