Average take-up of warehouse space has almost doubled over the past nine years to some 30 million sq ft – largely as a result of the growth in online retail, according to Savills.
Over the past four years build-to-suit has remained dominant with take-up accounting for up to 50 per cent of all transactions in 2016, mainly because of the lack of available speculative units during this time period. Savills suggests this is likely to change as more speculative schemes are announced in the coming year.
Kevin Mofid, head of industrial research, said: “For those who witnessed the last recession back in 2008, there is still residual nervousness around speculative development. However, 10 years later we are looking at a very different landscape where vacancy rates are as low as 3 per cent in and around London and the South East and there is simply not enough supply to satisfy the current demand.
“Assuming occupier demand doesn’t fall dramatically and there isn’t a significant increase in second hand supply, we believe that this is the perfect level of development to sustain the market moving forward.”
Richard Sullivan, national head of industrial & logistics at Savills, said: “We believe that the currently level of speculative development remains just right to fulfil outstanding demand. However it is important that we continue to respond to occupier requirements and provide the right space at the right time and in the correct locations. Vacancy rates of up to 10 per cent can be tolerated and in fact will likely redress the current rental imbalance we are currently experiencing in supply starved markets.”