The UK logistics market had a record-breaking year in 2018 with annual take-up reaching 35.9 million sq ft, the highest level since 2008.
Research from Cushman & Wakefield has revealed that in the fourth quarter of 2018 take-up reached 11.1 million sq ft, the strongest Q4 on record in over a decade. Whilst 2018 saw fewer deals, take-up was boosted by above-average deal size (191,000 sq ft). E-commerce accounted for 26% of annual take-up with Amazon taking 5.3million sq ft of space in the quarter.
Across the UK take-up reached record or near-record highs in the South East/East (7.4m sq ft), East Midlands (6.9m sq ft), North West (5.7m sq ft), North East (6m sq ft). The largest deal was Amazon’s letting of 1.99m sq ft at Integra 61 in Durham.
Speculative development also saw the lowest void periods since Cushman & Wakefield began tracking it across the UK in 2009, reaching on average nine months for new spec-built space. According to the report, 42 schemes of 50,000 sq ft and above are scheduled to complete this year, totalling 6.9m sq ft – 17% above the five-year average, with more on the starting blocks.
Prime rents for larger units rose by 3.3% during 2018, below the five-year annual average of 4.6%, with London registering the highest annual rate of growth (5.7%).
The Investment market remained resilient with volumes in Q4 totalling £1.6 billion, taking annual 2018 turnover to £6.7 billion. Foreign investors remained active, accounting for a third of all purchases across the year, with US buyers, led by Blackstone, being the most acquisitive foreign investor.
Bruno Berretta, UK Logistics & Industrial Research & Insight, Cushman & Wakefield, said:
“Precautionary stockpiling ahead of Brexit has been well documented in the media but overall has had limited impact on the market so far, with only a few deals understood to be motivated by the need to hold additional stock in the UK. The coming weeks will reveal if stockpiling is just temporary or could become a permanent feature of the market.”
“Assuming a smooth transition after Brexit day, enquiries tracked by Cushman & Wakefield point to a slower start to the year, with an expected rebound on the cards thereafter.”
The report also warns that regardless of the outcome of Brexit, labour availability is likely to become an increasingly critical factor in site selection, with four-fifths (81%) of manufacturing companies recently surveyed by the British Chamber of Commerce struggling to hire the right staff in 2018.
Logistics take-up in South Wales in Q4 2018 totalled 174,000 sq ft, bringing the annual total to 2.3million sq ft, a decline of 18% and 14% compared to 2017 and the five-year average respectively. Take-up was split between Grade B (65%) and Grade C (35%) stock, highlighting the severe shortage of good quality industrial accommodation in the region. Total availability has fallen sharply over the year by 42% to 3.2 million square feet and at end 2018, there were only two units totalling just over 400,000 square feet that could be categorised as Grade A.
Robert Ladd, Partner and Head of Logistics & Industrial agency at Cushman & Wakefield in Cardiff said:
“The latest Regional Outlook report reinforces the continued strength of the logistics sector which continues to be fuelled by the e-commerce sector and the demand for well-located distribution facilities that can facilitate reduced delivery times. The reduction in take-up in Wales reflects the shortage of good quality buildings suitable for today’s occupiers. Worryingly there is also a dearth in supply of serviced sites immediately available for development, so we expect take-up to continue to be below the five-year average in 2019. With the abolition of the toll charge on the Severn Crossings, Wales and the South West of England could benefit from companies currently based in Wales having to relocate into England where there are buildings and sites immediately available.”