Strong occupier demand reported in South Yorkshire

South Yorkshire is witnessing strong occupier demand for large industrial units due to cost, location and availability of labour according to commercial property experts.

A report published by Knight Frank’s Yorkshire office outlines that the market for industrial property across South Yorkshire has vast potential and could become a default location for businesses seeking central distribution space.

According to Knight Frank, availability of land and cost of labour is playing a significant part in decision making for occupiers sourcing new units with the region offering healthier labour markets compared to some of the traditional logistics hubs and indicates that a number of further transactions are in the pipeline for H1 2018.

Rebecca Schofield, partner at Knight Frank, said: “We have published our first LOGIC report for 2018, which covers activity across H2 2017 and it is clear that there is a confluence of factors which make South Yorkshire one of the UK’s hotspots for large industrial requirements and we anticipate a greater shift of emphasis to the region as a key national location for this type of accommodation.

“There has been an imbalance between demand and available supply for some time, particularly in respect of modern accommodation, but we have recently seen a developer response to this.

“This includes DB Symmetry, currently on site with 150,000 sq ft at Symmetry Park Doncaster and Verdion who have recently reached PC on 190,000 sq ft and are considering a further 120,000 and 60,000 sq ft unit. Other developers are also considering speculative development at Capitol Park, Barnsley, Peel Logistics Park in Sheffield and Doncaster Distribution Park.

“Although we are yet to see the full effect of Brexit, that impact will be equal across the UK, but the lower cost of development in South Yorkshire compared to other premier industrial areas can only play to the region’s strengths.

“The small to medium sized sector continues to perform well although suffers from a severe lack of stock. As a result of the of stock shortage, headline rents for second-hand accommodation are improving, particularly for estates where the landlords have invested to improve the accommodation, such as Parkwood Industrial Estate and Tinsley industrial Estate, Sheffield.

“Viability continues to be an issue for small to medium sized units although we think a number will come forward with the support of grant or local authority funding, for example; Capitol Park in Barnsley.

“Headline rents across all size ranges have improved and we expect this to continue over the next 12 months. New headline rents are being quoted in respect of forthcoming speculative development, closing the gap between neighbouring regions.

“The Advanced Manufacturing Park, Rotherham, continues to thrive and headline rents here are currently at £7.50 per sq ft. A further phase of speculative development is under way due for practical completion in September 2018.

“Retailers continue to dominate demand with the continued increase in online retail creating opportunities for the logistics market. However this is causing challenges for the high street and cities will need to adapt and offer more by way of a destination and leisure experience to attract visitors rather than relying purely on retail offerings.

“Equally, occupiers are faced with having to adapt to cater for the on-line market and more importantly handling the returns, in which technology is playing a crucial part.”

Meanwhile, Knight Frank’s Logic Report reveals that the West Yorkshire industrial market is expected to continue to perform well into the first half of 2018 with a number of available units under offer.

Over 700,000 sq ft of industrial/warehouse space was transacted across West Yorkshire during the second half of 2017 involving units above 50,000 sq ft.

When combined with take-up in the first half of last year, this brings the total transactions for 2017 to 1.4m sq ft, which is in line with 2016’s figures.

According to Knight Frank’s report, availability has remained stable, as several buildings have entered the market to offset the strong take-up seen earlier in the year.

As with other regions, high-quality existing and new build industrial stock in the mid-size range (30-75,000 sq ft) remains in short supply and there was limited speculative development during 2017.

Iain McPhail, partner with Knight Frank’s industrial property team in Leeds, explained: “The market rallied during the last three months of 2017; consequently we expect to see improved take-up figures in the first six months of this year.

“Prime rents for mid-sized distribution warehouse units have now broken the £6.00 per sq ft mark with the recent letting of the 50,500 sq ft Unit F Trident Park to the Kelling Group which completed in October. Prime rents are anticipated to increase in the near future, with quoting rents at three new speculative warehouse units at the Trilogy@Logic development situated within the wider Logic Leeds scheme  being marketed at £6.25 plus per sq,” said McPhail.

“There also remains a dearth of ‘Big Sheds’ in West Yorkshire above 200,000 sq ft, with the exception of the 215,000 sq ft Axis 62 unit in Normanton and ‘The Copperworks’ on Haigh Park Road in Leeds, which is currently under refurbishment and extends to over 300,000 sq ft.

“The lack of stock in this size range has resulted in an increase in activity in the design and build market. Notably the largest deal of the year so far in West Yorkshire involved technology distributor Premier Farnell taking a bespoke 361,000 sq ft unit at Muse Development’s Logic Leeds scheme within the Leeds City Region Enterprise zone.

“There has been a marked rise in enquiries and occupier activity since the turn of the year and with several larger buildings already under offer in the region, it is expected that to be another good year for the industrial market,” added McPhail.