Speculative development returns to region’s industrial and office markets

The region’s industrial and office markets will see a boom in speculative development this year to meet increasing occupier demand, new finding reveal.

According to Cushman & Wakefield, 2019 will see the return of much needed speculative development in the logistics and industrial market within both the Big-Box and Mid-Box markets, with the sector continuing to be the ‘shining star’ of asset classes in the region.

Jacques Esterhuizen, associate at Cushman & Wakefield, said: “The Industrial & Logistics market witnessed a strong year in 2018 driven by the online retail sector and this looks set to continue this year, most recently demonstrated by the 731,000 sq ft pre-let at iPort in Doncaster to an on-line retailer. In addition, there is currently 930,000 sq ft of speculative ‘Big Box’ development recently completed or under construction in the region.”

In the offices market, Adam Cockroft, partner and head of office agency at Cushman & Wakefield, identified Leeds as a leading occupier ‘hot spot’ which has resulted in Grade A availability reaching its lowest point since 2016.

He said: “Speculative construction is likely to increase to keep up with demand. Mirroring the national outlook, we are also seeing occupiers seeking more flexibility and experiential spaces with many deferred to the serviced office sector which is rapidly growing. We are also seeing the renaissance of some out of town locations such as Thorpe Park and White Rose Office Park which are able to offer quality buildings, class leading amenity and excellent transport links.”

In the investment market, Yorkshire and the Humber witnessed a bumper year with transaction volumes up 35% on the previous year to £1.9bn, driven by ‘exceptional’ years in the office and industrial sectors.

Richard Brooke, partner, capital markets at Cushman & Wakefield, said: “Q1 2019 transaction volumes have reduced by about 15% when compared to the same period last year. The slowing of activity is most notable in the larger lot sizes as some institutional investors are slowing their acquisition strategies amidst uncertainty. Market activity is currently focused on the smaller deals being driven by private investors, property companies and some of the regional local authorities. We anticipate Q2 will follow a similar trend to Q1 but deals to pick up in the second half of the year, particularly Q4.”

The residential market has seen an increase in new build housing in the region, but this still is not meeting delivery targets.

Philip Roebuck, partner, residential at Cushman & Wakefield, said: “Whilst Help to Buy has underpinned 44% of new homes sales in the region, the current scheme ends in 2021 and the replacement scheme has much tighter eligibility criteria which will require housebuilders to adapt. We are seeing an increasing supply of city centre and suburban PRS schemes, which have had limited delivery in Yorkshire to date but we anticipate 1,000 units to be delivered this year.”