Manufacturers lead H1 demand for big box units

The 130,000 sq ft unit taken by Aston martin at WDP40

A manufacturing-led demand for modern distribution and logistics facilities has seen more than five million sq ft of big sheds taken up across the Midlands in the first half of 2017.

Demand for units of 100,000 sq ft and above continues to be strong throughout the region.

Analysis of the industrial market by property consultants JLL has shown that in recent years, online retail has consistently been the biggest single user of such space.

However, the region’s strong manufacturing sector – especially the automotive industry – now has the most voracious appetite for space.

The JLL report shows the sector has been responsible for 34% of all deals completed in the first six months, with lettings to logistics operators second at 30% and retail claiming third place with 26%.

Carl Durrant, JLL’s Birmingham-based industrial and logistics director, said 2017 was on target to set an all-time high for big shed lettings in the region; that is providing demand in the second half holds up.

“We’ve seen a lot of weak national economic data this year, but these figures underline the long-term strength of the industrial and logistics market in the Midlands,” said Mr Durrant.

“Nationally, demand fell back in the first half, but the opposite was true in this region. The H1 take-up matched the figures for H2 in 2016, and were also up a very impressive 25% on H1 last year, so it’s very likely that this could be an all-time record year.

“It was also very pleasing to note that almost 60% of the space taken up across the entire UK was here in the Midlands.”

The units let during the first half were evenly split between the East and West of the Midlands, with 3m sq ft of new schemes and the remainder made up of good-quality second-hand stock.

Of the new space, the JLL data showed 80% had been constructed to client specifications (known as Built-To-Suit) with 600,000 sq ft brought forward on a speculative basis.

Concerns about a shortage of available space may also be easing, with Mr Durrant reporting a sharp increase in available new space between last December and the end of June 2017.

“Supply was a third higher in just six months, which I can’t recall happening before, after a surge in speculative development – particularly in the West Midlands,” he added.

“As a result, the vacancy rate in this region has edged above the national figure of 6%, with 8% in the East Midlands and 7% in the West. At the end of June, 22 Big Box units were under construction nationally, and 16 of those were in this region.”

Looking ahead, the JLL director said he was bullish about both rents and the delivery of new space.

“I think close to 3m of Big Box units could be brought forward in the next 12 to 18 months in the Midlands, on a speculative basis” said Durrant. “We also see rents growing across the distribution and logistics sectors, at an annual average of close to 3%, between now and 2021.

“However, I expect prime rents to show even stronger growth, and I believe the very best returns will come from prime distribution space which is connected to strategic infrastructure networks.”

Click here to sign up to receive our new South West business news...