Industrial units and warehouses continue to perform

Posted by Bonsors on 22nd July 2019 -

With the seemingly insatiable demand for online shopping, the demand for warehouse space has risen and developers have followed suit investing in industrial units and warehouses to facilitate storage and distribution requirements. 

The latest RICS market report for Q12019 sees a continuing decline in retail space, office space remaining stable and an increase in the demand for industrial units and warehouse space.  

Conversely, availability for tenants looking for industrial space fell slightly as vacant space reduces although for retail the choice for tenants increased as vacancies increase, according to RICS. 

Development of industrial units also continues increases to serve the UK’s logistics and distribution sector but Brexit is seeing the market slow down, according to latest reports.

As the consumer appetite for internet goods grows unabated together with their rising expectations such as next day and even same day delivery, warehouse space will need to increase massively year-on-year. 

In its report ‘What Warehousing Where’, the British Property Federation calculated that currently there’s 69 sq ft of warehouse space per home in England. Compare that to the government’s target to create 300,000 new homes a year and to keep pace, an additional 20.6 million sq ft of warehousing is required, the equivalent of 280 football pitches per year.

Not surprisingly, it’s in London where space will be in most demand. Currently, the capital has the least amount of warehouse space per home than any other region in the country at just 40 sq ft per home. As a key distribution hub, the Midlands boasts the most at 111 sq ft.

Despite the sector’s growth and predictions of the need for further expansion, Brexit is having an impact. Figures from commercial property and real estate consultants Cushman & Wakefield show a 35% rise in grade A availability in the first quarter of the year. Grade A stock totalled 26.8 million sq ft and 45% of all available space. The largest availability was in the Midlands where large speculative units are being built.

Amazon and other e-commerce businesses continue to dominate the leasing market and account for a third of all take-ups. Deals by Amazon were the largest for the quarter. The online retailer secured a 730,000 sq ft pre-let at iPort Doncaster and 575,000 sq ft at Gazeley’s Altitude in Milton Keynes, the largest speculatively-built unit previously available on the market.

There were a record number of enquiries since 2016 for commercial units over 50,000 sq ft whilst rents also continued to grow. 

Meanwhile, latest figures from Savills suggested that unless a further £5bn was transacted by the end of June in addition to the £15bn by the end of May into the commercial real estate sector, it would be the slowest half year since 2013. Again, with the uncertainty of Brexit, Savills suggests that it is unlikely that investment volumes will attain the five-year average of £63 billion.

Here in Kingston-upon-Thames and the surrounding area, we are certainly seeing a continued demand for industrial units and warehouses together with a reduction in tenants looking for retail space and a continued need for grade A office space. There is no doubt Brexit as it draws ever closer and its accompanying political dramas show no sign of ending, there’s increased uncertainty amongst businesses which is reflected in this slower market.