Positive outlook for logistics market – Knight Frank
THE outlook is positive for logistics and industrial property owners and occupiers in the West Yorkshire market in 2014, according to research from Knight Frank.
The global property consultancy said it is anticipating a much more active year in 2014, with an encouraging start already as far as occupier demand is concerned.
Tom Lamb, industrial property specialist at the Leeds office of Knight Frank, said: “The continued limitations created by scarce supply, coupled with the short-term lack of speculative development, will encourage many occupiers to seriously consider the possibility of design and build units in the near future.
“We anticipate the investment market will continue to improve, with solid demand from funds and property companies, with particular interest in multi-let industrial estates. Additionally, demand continues to grow for well-let larger units, particularly from overseas investors.”
Overall take-up of industrial units in West Yorkshire over 50,000 sq ft was 635,000 sq ft in the second half of 2013, down 44% from the same period last year. The annual total for the region was 1.76m sq ft, up 6%. The vast majority of activity involved second-hand space, with only two deals for new space agreed over 2013, the firm said.
Lamb said: “Activity is focused at locations where stock remains available, with extremely limited options for a majority of occupiers. The severe lack of choice has resulted in many occupiers compromising on location and desired quality.
“Interestingly, the length of time for property acquisition has reduced over 2013 as occupiers have taken note that stock is in short supply.”
While overall supply remains restricted, there is an acute shortage of good quality units in the 30,000 sq ft to 50,000 sq ft range. Developers have begun to take notice, with several seriously considering undertaking speculative development in this mid-size range, Knight Frank said.
Lamb said: “One such example is Muse Development’s Logic Leeds, where the first phase of major infrastructure works completed at the end of last year. Some 1.6m sq ft of warehousing space has been approved, which is largely focused in the midsized unit range. It is understood that early discussions have begun with key local occupiers, potentially leading to possible pre-lets or pre-sales in 2014.”
Knight Frank said the supply crunch in West Yorkshire has begun to impact prime headline rents, which have begun gradually creeping back. Incentive packages are beginning to harden, particularly for Grade A space. Prime headline rents are currently £5.25 per sq ft for units under 20,000 sq ft; £5.25 (20,000-50,000 sq ft) and £4.75 (over 50,000 sq ft).
Lamb said that land supply remained ample overall, specifically around Leeds and Wakefield.
“However, opportunities in Bradford, Kirklees and Calderdale remain relatively limited. These areas require more land allocation, primarily due to their strong manufacturing past and current levels of obsolescent accommodation,” he said.
“Land values are quickly approaching levels not seen since the market peak in 2007. This is evidenced by Prologis’s recent sale of 12 acres in Bradford, which is understood to have traded for £260,000 per acre.”
