Warehouse sector ‘heading for supply slump’
Occupiers are being warned to act now to secure buildings as there is a potential “supply slump” on the horizon within the next 24 months in the big box (100,000 sq ft plus) warehouse sector.
A lack of consented development land, coupled with rising construction costs and increased borrowing costs for developers is likely to result in fewer big box developments coming through the development pipeline, according to Lambert Smith Hampton (LSH).
LSH says latest data shows that only 3.5 million sq ft of new space is to be delivered across the region in the next 12–24 months. With developers facing rapidly rising construction costs and a further 5.5 million sq ft of industrial space likely to be put on hold, there is likely to be upward pressure on rents across the region.
Q4 of 2022 is unlikely to offer any respite, with only a further 1 million sq ft of space to be delivered and just a couple of second-hand existing units available in the market.
Scott Morrison, a director in LSH’s industrial and logistics team, said: “Unless a large wave of second-hand stock comes to the market, there is likely to be a marked drop off in supply. Annual requirements for large-scale (100,000 sq ft plus) industrial space throughout the region typically stands at around 5 million sq ft, so the current supply pipeline is falling well short of typical market demand.”
Like most sectors, the industrial and logistics sector is likely to face challenges and some headwinds in the next 24 months with the economic background and rising costs. However, occupiers are warned to act now if they have lease events or need to upgrade or expand their facilities, or face increased competition and potentially higher rental values in the coming years.
LSH has recently been appointed on Firethorn’s S42 scheme at Sherburn in Elmet which will deliver four units comprising 660,000 sq ft of new space. This comes on the back of being appointed on Arrow Point in Barnsley, which is nearing completion in December 2022, providing a combined 451,000 sq ft to the market across two modern units.
