Research article

The logistics and industrial market in London and the South East

Article

Contacts & Related Research

Abstract

2018 has seen strong take-up via freehold land acquisitions. This will restrict speculative development opportunities and in turn keep vacancy rates lower and support sustained rental growth

Symmetry Park, Bicester

Symmetry Park, Bicester

Table 1

TABLE 1 | Key stats
Source: Savills Research

Supply

  • Over the last two years supply in the region for units over 100,000 sq ft has been reasonably consistently hovering around 4m sq ft. At the half year point of 2018 there is 4.09m sq ft of stock on the market across 22 units, with an average size of 186,000 sq ft.
  • The available supply is still dominated by smaller units with 57% of supply in the 100,000 - 200,000 sq ft category. However, for the first time in over four years, there is now a unit on the market over 500,000 sq ft. Altitude, developed by Gazeley, and standing at 21m tall and 574,000 sq ft completed in Q1 this year and offers occupiers an existing option in the South East who may have previously looked for Build to Suit options.
Figure 3

FIGURE 3 | Supply by grade
Source: Savills Research

Take-up

  • 3.96m sq ft of warehouse space was transacted in the first half of the year, the highest amount since 2014 and 70% higher than the long term average.
  • Whilst the average deal size in 2018 has been 396,000 sq ft, up from the long term average of 215,000 sq ft, it is worth noting that there have been 10 separate transactions. This is in line with recent years and demonstrates a liquidity of demand across all ranges and sizes.
Figure 4

FIGURE 4 | Average size deal increases
Source: Savills Research

  • Demonstrating the demand for well located and cost effective space deals involving three second hand units, and totaling 405,000 sq ft, along the Southern M1 corridor have all been concluded in the second quarter of this year.
  • Rents continue to rise in the market, demonstrated at Heathrow where Do & Co have paid £15.75 per sq ft for a 172,000 sq ft Build to Suit unit, a new record for a non air side unit.
Figure 5

FIGURE 5 | Take-up
Source: Savills Research

Development pipeline

  • There 11 units currently under construction in the region which total 1.72m sq ft. Pleasingly many markets are seeing much needed supply come forward including the M40 and M1 corridors along with 380,000 sq ft within the M25.