Leeds is a small and mid-box warehousing ‘hotspot’ and still has huge growth potential but under supply is holding it back

Our recent report into the small to mid-box warehousing market, conducted in partnership with Savills, has shown that Leeds is one of the top locations in the UK identified as a ‘regional hotspot’ for investment in sub-100k sq. ft. industrial and logistics (I&L) property.

In recent years, there has been significant focus on the industrial and logistics property space, with much of it centred around demand for big box warehousing of 1m sq. ft. and above. But a bigger story has been hiding in plain sight and that is the continued resilience and growth of the small- to mid-box sector (sub 100k sq. ft) – and importantly, where regional opportunities exist.

In carrying out this research, huge unmet demands in the small to mid-box space have also been uncovered and the economic impacts are far reaching. Our findings are based on an analysis of socioeconomic factors, local infrastructure and leasing activity over the past five years, revealing that the under supply of land to the sub-100k sq. ft. space has cost the regional economy in lost opportunities for jobs and wealth creation.

Our report – BIG things in SMALL boxes – reveals that the total amount of floorspace allocated to the small- to mid-box market in Leeds is 86,377,000 sq. ft., which is available at an average rent of £6.21 per sq. ft. Rents for small and mid-box space in the city grew strongly in the decade to 2021 – at a rate of 43%.

This strong rental growth in Leeds reflects the high demand we are seeing for small- to mid-box space, which is partly due to the city’s excellent links with key freight-handling infrastructure, such as the east coast ports, for example Hull, Immingham or Goole. However, rents are also being driven up due to a lack of supply of sub-100k sq. ft. space to meet the needs of businesses in the area.
At Potter Space, we are calling for local planners to recognise the economic opportunity that exists here in Leeds, and Yorkshire as a whole, and allocate more land for the development of sub-100K sq. ft. property. This will help to attract inward investment and create jobs for local people.

The importance of the small to mid-box logistics property market to both the regional and national economy should not be underestimated. This segment of the I&L market accounts for 95% of all I&L property nationally, and more than half – 56% – of its total floorspace. Occupiers of these boxes can include businesses of all sizes – from the largest multinationals, through to small businesses. However, many of them are small and medium-sized businesses – the backbone of the UK economy.

From a national perspective, the report reveals that the current lack of supply of sub 100K sq. ft. space is responsible for the English economy missing out on an estimated £480 million GVA (Gross Value Added) pa, as well as 8,600 direct and 7,300 indirect jobs pa.

Jason Rockett, managing director of Potter Space

Demand for small and mid-box property remains strong, despite increased economic uncertainty, and is expected to grow, according to freight mode predictions. LGV traffic is predicted to increase between 25% and 108% by 2050, rail traffic could increase by 74% by 2043/44, global air freight could increase by 121% by 2039 and port tonnage, 39% by 2050.

In light of these figures, we welcome the Government’s focus on growth, as outlined in the recent ‘mini budget’. We are heartened to see an emphasis on streamlining planning laws and processes, and hope that there will be commitment to doing across the spectrum of property and infrastructure development. There are many stakeholders involved in this, and freeing up more development land requires innovative thinking from local authorities, a better focus from central government on industrial and logistics property, and for developers themselves to continue to engage positively in the process.

The acceleration of new road and rail projects is particularly encouraging, being fundamental to the growth of the industrial and logistics sector. The subsequent benefit in jobs and wealth creation for local economies can not be understated.

It is clear from our report that under supply is a major problem, especially in regional hotspots like Leeds, but there is good news. Developers are ready and willing to invest in the development of more small- to mid-box spaces in the region to do what we can to help meet demand and support the growth of the local economy. Without more land allocation for small and mid-box space, this growth potential can’t be realised and in the current climate, that’s a great shame.

To download our report BIG things in SMALL boxes, visit the Potter Space website here.