Lack of space holds back market

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Take-up in the UK industrial and logistics market fell 25 per cent year-on-year in 2012 to a total of 76.1 million sq ft, according to Lambert Smith Hampton’s recently released Industrial and Logistics Market 2013 report.

Around 30 per cent of overall demand last year was focused on Grade A property, but only 10 per cent of the stock now available on the market is in this category it reports.

“Occupiers of small and medium sized units are struggling to find any suitable space to accommodate their future plans,” said Steve Williams of Lambert Smith Hampton. “In the larger size ranges this is less of an issue as these more sophisticated occupiers are prepared to enter a build-to-suit project; however, for the smaller occupier this simply is not an option that is palatable or deliverable.”

The sharpest decline in activity last year was in the mid-range market, where transactions range from 10,001 sq ft to 50,000 sq ft. Take-up here was 50 per cent lower than in 2011 – while this is partly due to the lack of stock, Lambert Smith Hampton also notes that this market segment is heavily populated by SME occupiers, whose performance is greatly affected by the ups and downs of the economy.

Transactions of 50,000 sq ft – 99,999 sq ft did see an upturn in activity last year, with take-up rising 12.2 per cent year-on-year. Steve Williams pointed out that a large part of the demand in this market segment was being driven by the growing internet retail market, which has increased the traditional occupier basis in this area of the market.

Availability in the distribution warehouse market fell to just 75 million sq ft – the lowest since 2007. Current availability of Grade A distribution warehouse stock is just over seven months’ supply, the firm notes.

Lambert Smith Hampton expects to see rising prime rental values this year, where new schemes emerge. Williams said that secondary rents are likely to register growth in locations where there is demand combined with acute supply shortages – such as Greater London, the South East, the North West and the West Midlands. Speculative development could also return in such areas, for the large-scale and the small and medium size markets, and also in the newly evolving mid-box sector, he adds.


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