Big shed take-up at lowest level in a decade

Take-up for large industrial and logistics facilities in the UK has fallen to its lowest level in a decade, according to new research from Savills. The agency’s latest Big Shed Briefing report, which covers sheds measuring more than 100,000 sq ft, showed take-up reached 12.5m sq ft in H1 2023, the lowest recorded since 2013.  However, it noted the figure was just 1% shy of the pre-Covid H1 average between Q1 2007 to Q1 2020, signifying a return to levels seen before the pandemic.   Supply has risen to 41.9m sq ft, up by 120% on Q2 last year. Some 9m sq ft of speculative developments completed in Q2 2023 alone. Researchers said the figures reflected a vacancy rate of 6.25%, in line with a pre-Covid average of 6.3%.  Savills said there is 21.8m sq ft of grade-A space on the market, which at 52% of total supply, was the highest level since 2020.  However, Savills expect this to trend downwards as current supply is leased up and the development pipeline is not replenished as quickly.  There have been just 22 speculative developments announced this year, compared with 39 over the same period in 2022.   A key factor driving lower take-up was the lack of transactions for sheds measuring more than 400,000 sq ft, with just six completing so far this year.  It is also attributable to the fall of build-to-suit deals, which have reduced from 16.2m sq ft in H1 2022 to 5.2m sq ft in H1 2023.  However, Savills expects take-up to rise in the second half of the year. Data from the firm’s occupational requirements index shows enquiry levels have risen by 64% in H1, driven largely by a significant rise in demand for facilities measuring more than 500,000 sq ft.   In terms of occupier mix, online retail accounted for just 6% of space taken so far in 2023. Manufacturing-related demand has continued its resurgence, amounting to 28% of take-up, compared with 13% in 2021.   Richard Sullivan, national head of industrial and logistics at Savills, said: “As we reach the halfway point of 2023,  economic data in the UK remains volatile and unpredictable. As a result of inflation, higher costs of capital will impact the market in many ways, with developers finding it hard to fund speculative development. In turn this will constrain pipeline moving forward.  “However, despite uncertainty, unemployment remains historically low and consumer confidence, in relation to people’s individual circumstances, remains surprisingly high. This means occupiers still need to consider the suitability of their supply chains for a market that will continue to grow, notwithstanding the challenges in the short term.”   To send feedback, e-mail pui-guan.man@eg.co.uk or tweet @PuiGuanM or @EGPropertyNews