Logistics market sees surge in demand
Demand for short-term industrial space surged in March as the impact of COVID-19 was acutely felt by the logistics sector, while take-up across the Midlands was on par with the five year average.
According to new data from Cushman & Wakefield, the government lockdown and consumer stockpiling led to an increase in demand for short-term space from supermarkets and the pharmaceutical and public health sector, leading some landlords to consider short-term lettings.
Cushman & Wakefield’s Industrial Outlook revealed that despite the increase in demand for short-term space, total take-up of industrial space in the UK fell 32% to 5.5 million sq ft across 41 deals as many retailers operating in ‘non-essential’ sectors such as fashion and homewares temporarily close their online operations in response to employee health and safety concerns.
Bruno Berretta from Cushman & Wakefield’s UK Research & Insight team, said: “The material uncertainty created by the COVID-19 pandemic and the practical implications of the government-imposed lockdown, including the ability to carry out inspections, have had an undeniable impact on the UK logistics market. While some long-term strategic requirements are still progressing, many have been put on hold and overall new enquiries are down in March.”
The availability of industrial space edged up slightly during the first quarter of the year to 72.4 million sq ft and is up by 22% from the same period last year. The lockdown is also disrupting construction activity, with several speculative schemes paused or delayed. So far, 2.5 million sq ft has completed this year with another 4 million sq ft underway.
Berretta said: “The uncertain demand outlook and reduced lenders’ appetite for development finance will curtail speculative development in the short-term. But the net impact on supply will depend also on the amount of second-hand space returning to market due to tenant defaults.”
Despite the current uncertainty, Cushman & Wakefield believes the long-term outlook for the logistics sector remains positive, with COVID-19 likely to accelerate ongoing structural trends such as a greater penetration of online shopping and manufacturers and retailers considering holding more stock domestically to protect themselves against future supply chain disruptions.
Simon Lloyd, partner, logistics and industrial agency at Cushman & Wakefield in Birmingham, said: “Take-up across the Midlands was on par with the five year average, although the East Midlands performed better than the West Midlands, and there had been a significant increase in enquiry levels at the start of 2020 following the election at the end of last year.
“Not all transactions have been put on hold as a result of the Covid-19 pandemic, although some have, but there is now evidence that some of those are coming live again. The pandemic has generated a number of short-term requirements, which many landlords are happy to consider.”
