Supporting Yorkshire: Why I&L space development is crucial for economic prosperity
Jason Rockett, managing director of industrial and logistics property company, Potter Space, shares his view on the small to mid-box (sub-100k sq ft) property market in light of new research.
As one of the leading contributors to the stability of the economy, the industrial and logistics (I&L) sector is responsible for supporting a wide and varied range of businesses including the smooth running of essential services through the transportation and handling of good and materials all year around.
Despite this, a recent study by Potter Space, in collaboration with Savills, shows that the sector is facing a major challenge in the face of dwindling space for development, particularly in Yorkshire.
The acute lack of supply for smaller premises below 100k sq ft – known as the small to mid-box segment of the market – has led to a phenomenon that’s referred to as ‘suppressed demand’ (where businesses have the appetite or demand for growth, however the units, or land to develop more units on, just isn’t available) and is stifling economic growth.
The Government is beginning to recognise the importance of the sector, and the recent freight and logistics and the planning system call for evidence has been seen as an important step forward. However, there are still huge steps to be made by local authorities when considering the impact on the local and national economy to raise the importance of industrial and logistics property alongside the historic focus on housing numbers.
Our latest state of the market report, which details the happenings of BIG things in SMALL boxes, has revealed that small to mid-box warehouses (sub-100k sq ft) have been facing immense pressure as demand for space from businesses continues to outstrip the supply of available land.
In fact, in last year’s state of the market report, it identifies that demand for space had been suppressed by around 38 per cent in England. This equates to an average loss of £480m in potential Gross Value Added (GVA) per year. This highlights the importance of collaboration between ‘big box’ developers, developers with the small to mid-box sub-100k sq ft market and local authorities to unlock opportunities in the local communities in which they serve.
In addition to the financial impact of suppressed demand on local economies, the loss of potential demand in certain areas can also have severe socio-economic impacts. Not only does the lack of stock affect the availability of space for businesses, but it also means that the investment in job creation and opportunities for growth are moved elsewhere. However, the report shows that unlocking space in Yorkshire (which is currently operating with a suppressed demand rate of 47%) and other key areas for development could have a significant impact on the local economy.
However, despite barriers to growth and opportunity, the small to mid-box has remained resilient in the face of a period of economic instability, resulting in steep inflation and increasing interest rates.
Our research shows that occupiers within small to mid-box premises in the I&L sector are becoming more diverse, with an increasing number of these developments becoming hubs for administrative and research and development (R&D) roles. This is on the back of increased office co-location which has increased by 16% since 2020. The impact of the more even spread of sectoral demand within smaller premises is substantial – with transport and warehousing only making up 20% of all occupiers, and other occupiers including the likes of public administration and in some cases even supporting emerging markets (such as drone and aircraft development).
In fact, the report has illustrated that the demand for small to mid-box premises is likely to grow in the coming years, with demand predicted to reach anywhere between 16 million and 22 million sq ft per year between 2025 and 2026.
The small to mid-box (sub-100k sq ft) market is an essential cog in the UK’s economic infrastructure, with a diverse range of small to medium enterprises and household names relying on the strategic locations of smaller facilities to support regional demands. However, in order to support the growing demand and unlock greater opportunities, it’s important for local authorities to allocate planning permission to a wide range of developers.
To read the full report, click here.