Research article

Nationwide overview of the UK logistics and industrial market

Abstract

We are still searching for superlatives to describe the ongoing health of the UK logistics and industrial market


Unit 3 Panattoni Park Nottingham

Unit 3 Panattoni Park, Nottingham

Given the current economic headwinds, debate about the health of the retail sector and continued uncertainty about what our future trading arrangements with the EU will look like into 2019 and beyond, it is pleasing to report that we are still searching for superlatives to describe the ongoing health of the UK logistics and industrial market.

Currently occupier demand and warehouse supply remain in equilibrium. Reassuringly the mix of companies taking warehouse space has widened to include high street retailers, grocers, pure play retailers and manufacturers.

We should remember that the health of the retail sector is crucial to the health of the logistics sector, as almost two thirds of take-up relates to retailers in some way. Therefore activity by retailers such as Marks & Spencer, Shop Direct and B&Q to take additional warehouse space to ensure their supply chains are fit for purpose is a positive sign.

Take-up

  • At a nationwide level take-up for the half year has reached 16.4m sq ft, 3.3m sq ft more than this time last year and 33% higher than the long term H1 average.
  • Whilst build to suit transactions have accounted for 57% of deals so far this year it should be noted that deal counts have been maintained at above average levels. This demonstrates a liquidity of demand and also that its not just larger deals skewing the take-up numbers higher.
  • The East Midlands, Yorkshire and the South East have all achieved above average or record levels of take-up.
Figure 1

FIGURE 1 | National take-up
Source: Savills Research

Supply and Pipeline

  • Total supply in the UK has fallen in 2018 and now stands at 27.7m sq ft, reflecting a vacancy rate of just 5.8% nationally. Of the current supply on the market 44% is classified as grade A, up from just 35% in Q1 2015.
  • We expect this position to alter over the next year as there is currently 9.1m sq ft due to reach PC in the second half of 2018 and into 2019.
Figure 2

FIGURE 2 | National supply and vacancy
Source: Savills Research